Jim Cramer: Buying Stocks Now is Against the Federal Reserve
CNBC host Jim Cramer stated on the night of the Federal Reserve's interest rate hike that buying stocks now is officially against the Federal Reserve. The federal funds target range was raised by 25 basis points to 3.75% to 4%, marking the first rate hike in three years.
He referenced the old Wall Street adage "Don't fight the Fed": buying stocks during easing is favorable, while buying during tightening is unfavorable. Chairman Kevin Warsh stated after the meeting that inflation is too high and persistent, and this rate hike serves to return to the 2% target. Cramer predicts that every subsequent rate hike will negatively impact stock prices. The yield on the 10-year U.S. Treasury has reached nearly a 20-year high, exceeding 5%, and risk-free returns are beginning to compete with stocks.
He did not advise people to liquidate their positions but emphasized that the circle of stocks that can perform during a tightening cycle is narrowing. Defensive sectors like pharmaceuticals were identified as still viable; most sectors will struggle during Warsh's "war" period. Buyers will return, but they need to wait for the shock to pass. The day before the rate hike, he warned against playing guessing games and reminded that being bullish after the rate hike means fighting the central bank.
He compared the current situation to the fall of 2018: both are in the second year of Trump's presidency, with high oil prices, a 10-year yield at 5%, and inflation above the 2% target; that year, the S&P 500 fell about 20% from its September peak to Christmas Eve. The difference he noted is that the current chairman has firmly stated anti-inflation measures at Jackson Hole. If oil prices surge again due to renewed conflicts in the Middle East, both interest rates and the stock market will be impacted together.
His own positioning logic remains twofold: avoiding interest rate-sensitive sectors while believing that capital expenditures in artificial intelligence will not stop. After the Dreamforce interview, he mentioned that Anthropic and OpenAI, due to their ongoing revenue growth, will not halt their key operations, and components for data centers can be purchased after the Fed's impact subsides, with cybersecurity focusing on Palo Alto, Okta, and CrowdStrike. He previously stated that when rates are cut in December 2025, the Fed will still be on the bullish side, and buying stocks will not mean fighting the central bank; this time, his tone has shifted.
Market mechanisms involve style switching after policy shifts, not a single-day liquidation. Sellers must raise discount rates and reprice long-duration assets; buyers are narrowing down to defensive stocks that can withstand interest rates and capital expenditure chains with ongoing orders. Beneficiaries include short-term bonds, cash, and stable cash flow sectors like pharmaceuticals; pressured sectors include growth stocks and real estate chains that rely on cheap financing to support valuations. Funds are flowing from the "Fed is a friend" beta to selected stocks and bond yields.
Source: Public Information
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Cramer has used the phrase "Don't fight the Fed" for over twenty years, originating from Marty Zweig: buy during easing, buy less or lose during tightening. He wrote the same phrase in 1999, countering the claim that tech stocks were unaffected by interest rates; after Yellen's rate hike in 2015, he changed his stance to be more skeptical of rises rather than exiting the market. When rates are cut in December 2025, he said the Fed would be on the bullish side, but after the rate hike in September 2026, he immediately switched to "officially fighting the Fed." This verbal discipline follows the direction of the federal funds rate, not his show's slogan.
The capital path rewrites valuations based on discount rates. Overnight rates have moved from unchanged for three years to a hike, with the 10-year yield above 5%, squeezing equity risk premiums by risk-free rates. The financing costs for leveraged buyouts, buybacks, and long-duration growth stocks will rise first, while orders that can hedge against interest rates in pharmaceuticals and some AI capital expenditures will move later. Money is withdrawing from index beta to companies that can generate stable free cash flow, with some also going into government bonds. Warsh's insistence on returning to the 2% target indicates that the market is being told that rate hikes are not merely symbolic.
The comparison falls on 2018 and 2022. In 2018, Powell's tightening combined with trade shocks led to a roughly 20% pullback in the S&P; in 2022, the rate hike cycle halved unprofitable tech stocks. Cramer's noted difference is that the current chairman has more decisively stated anti-inflation measures. The industry position has shifted from "rate cut trades" back to "stock picking in tightening": beta is no longer subsidized by the central bank, and alpha must rely on defensive cash flows or indispensable capital expenditures.
Structural judgments belong to the transfer of pricing power. Pricing power has shifted from liquidity narratives to central bank reaction functions: whoever can bring inflation back to 2% will determine stock discount rates. The mechanism is that once bonds start providing competitive risk-free returns, stocks must prove that their growth outpaces rising interest rates; sectors that cannot do so will be the first to lose funding, regardless of how hot the narrative is.
ABAB News · Cognitive Law
- Fighting the central bank means going against the discount rate.
- As risk-free rates rise, stories must become shorter.
- When policies shift, what survives is cash flow, not slogans.