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Powell should ‘slay these seven dragons’ for market to get better

CNBC’s Jim Cramer on Wednesday went by way of an inventory of financial issues that Federal Reserve Chair Jay Powell wants to deal with to tamp down inflation and in flip assist the inventory market rebound.

“Proper now, Powell’s shedding on too many fronts, which implies he has to get extra aggressive about elevating rates of interest to chill issues down. … Powell does have a frightening job, although,” the “Mad Money” host mentioned.

There “is a large schedule of issues. … I’ve solely listed the obvious seven. If Powell can slay these seven dragons, then earning profits within the inventory market will come simple once more. Till then, although, count on extra horrific days like right this moment. No achieve with out ache, and this time there’s a whole lot of it,” he later added.

Right here is the listing:

  1. Housing: “I believe mortgage charges should go to 7% or 8% earlier than it is simply too costly and new properties begin coming down in value. … Powell has a whole lot of wooden to cut to get charges that top, however he should achieve this,” Cramer mentioned.
  2. Autos: “Powell has to choke demand for vehicles and the easiest way to try this is to boost rates of interest. … We’d like a glut of vehicles to resolve this intractable drawback. Then the semiconductor makers can catch their breaths,” Cramer mentioned.
  3. Labor: “The extra corporations that determine they cannot afford to rent individuals right here, the much less we have to fear a couple of wage-price spiral,” he mentioned.
  4. Russia’s invasion of Ukraine: Cramer mentioned that whereas Powell doesn’t have management over its consequence or length, the struggle is inflicting commodities costs, together with oil and grains, to skyrocket.
  5. Excessive freight prices: Both a slowdown in commerce or a rise within the variety of drivers will assistance on this entrance, Cramer mentioned.
  6. Airfares: Airplane tickets have to get so costly that individuals journey much less and in flip spend much less, he mentioned.
  7. Client financial savings glut: Folks have to spend their pandemic financial savings in order that they’re motivated to return to work, in response to the host.

The Dow Jones Industrial Common slid 3.57% on Wednesday whereas the S&P 500 dropped 4.04%, each marking their greatest losses since June 2020. The Dow closed at its lowest degree since March of final yr. The Nasdaq Composite tumbled 4.73%. 

Cramer famous that declines within the inventory market recommend shoppers will spend much less, whereas a glut of stock at retail giants level to cost markdowns. These elements might assist decelerate the economic system, however Powell nonetheless has an arduous highway forward to deliver down inflation, he mentioned.

“Bear in mind, shoppers saving cash will assist break inflation, whereas extra spending simply accelerates it. … Much less shopper spending makes Jay Powell’s job lots simpler,” Cramer mentioned.

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