Investors face renewed Fed-driven volatility as Cramer urges selective buying
Markets are adjusting to a pattern in which Federal Reserve meetings trigger pre-decision selling and a rebound once uncertainty eases. Jim Cramer says that setup is becoming more relevant as interest rates rise, with the next policy meeting scheduled for Oct. 27 and 28.
Highlights
- The Federal Reserve raised its benchmark rate by a quarter percentage point to 3.75%–4% Wednesday, its first increase in three years.
- Stocks declined in seven of eight sessions before the Fed rate decision and rebounded Thursday, reflecting renewed event-driven volatility.
- Cramer urges selective post-Fed buying, especially in technology, highlighting cybersecurity firms, Intel, and Micron as Investment Club holdings.
Fed meetings reshape trading strategy
As reported by CNBC, Cramer says investors should avoid panicking or selling stocks simply because a Federal Reserve meeting is approaching. He argues that the latest market action shows the return of what he calls a "big bad event," a scheduled catalyst that prompts selling before the event and buying afterward when the outlook becomes clearer.The Federal Reserve raised interest rates by a quarter percentage point Wednesday, its first increase in three years, taking its benchmark rate to a range of 3.75% to 4%. Stocks had fallen in seven of the eight sessions before the decision and then rebounded Thursday, a move Cramer says helps explain both the earlier sell-off and the subsequent rally.
Cramer adds that similar trading patterns were common decades ago, when uncertainty around major bond auctions and Fed decisions weighed on markets for days. He expects that behavior to matter more if the central bank continues to lift rates.
Selective buying seen after weakness
Rather than trying to time a sell-off by exiting positions ahead of a Fed meeting, Cramer says most investors should consider using weakness near the decision as a buying opportunity. He recommends making purchases as close to the meeting as possible and adding more immediately after it, while remaining selective about which stocks to own.He points to technology as one area where investors may return after the meeting, and reiterates his preference for cybersecurity companies as well as Intel and Micron. Cramer's Charitable Trust, the portfolio run by CNBC's Investing Club, owns shares of Intel and Micron.
In our earlier report on the post-Fed market rebound, we highlighted how U.S. stocks pushed higher as Treasury yields eased and technology shares led the advance. That update noted Intel and Micron as key drivers of gains, while Johnson & Johnson also drew attention after its CFO pointed to stronger-than-expected sales growth prospects over the coming years.
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