Cramer explains why another big recession is not in the cards
If CNBC Jim Cramer wants investors to learn one thing from the stock market's last volatility, it's not a repeat of the months leading up to the financial crisis in 2008.
" [People are] is missing the point. Nobody talks about a recession, says the "Mad Money" host, which is recovering from Wednesday's drop. "This is not the end of the world, like … you think it was when you watched yesterday's action. There is no systemic risk. The economy can go from very good to really mediocre."
Cramer hit the dramatic slide of earlier days to Two things: The idea that Wall Street is too bullish on the companies' 201[ads1]9 earnings, which could be shrunk by the Federal Reserve rate hikes, and President Donald Trump's trading account with China.
If Fed follows through on raising interest rates once again in December and three times in 2019, next year's earnings estimates for many companies are too high, "explained Cramer. [19659003] And if the president continues to push China into a corner of tariffs, the impact on business can be worse than people think, pointing to the possibility that US companies face earnings cutbacks, blocked deals or boycott because of ties to China . 19659003] This, coupled with Trump's attacks on Fed – like Cramer has repeatedly said that only Fold Chair Jerome Powell is going to hold the course and prove that the central bank is an independent institution and the chances of an economic downturn, said "Mad Money" hoster.
"We are talking about a slowdown that reverses much of the economy's recent growth and causes rounds and rounds of terminations," he said. Perhaps it goes from 4 percent to 1 or 2 [percent] thanks to the lack of demand for cars, homes, constructions and so many other industries – plastic, paper. It can easily be in short. "
What's not in the cards is another full blown recession, although many were worried that Wednesday's market-rich nosedive signaled more pain to come, he said.
" This is not a kind of rehash of 2007 where , at that time, an accident was inevitable, "said Cramer." It's more like 2006, or at least a much healthier version of 2006 when it comes to balances, where the crash can still be averted if our leaders know what they are doing. Let's hope the president and the Federal Reserve do a better job this time. "
