Jim Cramer: ‘Don’t freak out’ about Fed rate-cut size, focus on stocks that benefit
CNBC’s Jim Cramer said Monday that investors shouldn’t panic over the size of the Federal Reserve’s expected interest rate cut this week. Instead, they should focus on the stocks that will benefit from the easing monetary policy. The U.S. central bank is widely expected to start its rate-cutting cycle at the conclusion of its two-day September policy meeting on Wednesday. The size of the reduction, however, is still up for debate. As of late Monday morning, the market was putting about a 60% chance on a half-point, or 50 basis points, reduction and roughly a 40% chance on a smaller, more traditional quarter-point cut, according to the CME Group’s FedWatch tool. “We’re missing the forest from the trees,” Cramer said on “Squawk on the Street.” He stressed, “What matters is we’re in a rate cut cycle. In a rate cut cycle, you buy a lot of stocks that … should really start accelerating because they’ve been hurt.” Cramer pointed to homebuilding names like Home Depot and Stanley Blacker & Decker as beneficiaries of lower rates. That’s because when borrowing costs go down, activity in the housing market picks up and can attract more customers to supplies that both of these companies offer. Year to date, shares of Stanley Black & Decker and Home Depot are up nearly 4% and 10%, respectively, but lag the S & P 500′ s nearly 18% advance in 2024. Both stocks are key rate-cut plays in Cramer’s Charitable Trust, the portfolio used by the CNBC Investing Club. When central bankers announce their next policy move, Cramer said that there will likely be some market volatility regardless of the size of the reduction. “I’m urging people not to freak out about 25 or 50 [basis points], even as it will be the major source of discussion,” he said. “It’s a parlor game, and I don’t want to play it, but I recognize it’s here.” Cramer said that a half point cut would be “an overreaction,” arguing that he “struggles to find out where the overall weakness is in the economy, given the fact that we just had great earnings.”
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