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Figures suggest that inflation may cool down faster than expected




Longtime technician Larry Williams believes the stock market may have a stronger 2022 than many Wall Street forecasts, CNBC’s Jim Cramer said on Wednesday.

“The figures, as interpreted by the legendary Larry Williams, suggest that inflation could cool down faster than most money managers expect, which would mean that 2022 … could be a much better year for the market than we expect,” Cramer said.

The “Mad Money”[ads1]; host said Williams, who often uses historical data to make cycle forecasts, believes that inflationary pressures in the US “should already be at its peak”. While Cramer warned that Williams’ cycle forecast for the Consumer Precise Index is not a precise timing tool, he said it is worth considering.

Technician Larry Williams’ cycle forecast for the consumer price index from 2010 to today.

Mad Money with Jim Cramer

“In his view, [the first quarter] should be really the last really bad quarter for inflation, “Cramer said. If Williams is right, Cramer said there will be implications for the stock market because it could mean the Federal Reserve does not have to tighten monetary policy as aggressively as expected.

“That’s not the only reason Williams is positive about equities in 2022,” Cramer stressed. Another reason for Williams’ positive outlook is found in the ten-year pattern, which refers to the average market return based on the last digit in a particular year.

Looking at the average of years ending in “1” compared to Dow Jones Industrial Averages’ actual trade in 2021, it turned out to be a “pretty useful guide” last year, Cramer said. “You have to ignore the size and just look at the direction of the moves,” he said.

Dow’s average return this year ending at “1” compared to Dow’s performance in 2021.

Mad Money with Jim Cramer

Williams finds that the ten-year pattern for years ending in “2” indicates that 2022 could be a pretty choppy year for the Dow, according to Cramer. In particular, there has been a “significant low” expected to hit stocks in June or July, he said.

Dow’s average return this year ending at “2”, according to technician Larry Williams.

Mad Money with Jim Cramer

“Then you tend to have another fantastic buying opportunity around September, with the market tending to take off in the fourth quarter,” Cramer said. “Williams also points out that historically, this year ending in the number ‘2’, you will buy into any major sale” because the market usually has a solid year, “Cramer added.

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