If you listen to conventional wisdom and the endless parade of bearish pundits, then you’re sure to think the Federal Reserve is wrong in not raising interest rates and combating inflation head on. But Jim Cramer told his Mad Money viewers Wednesday that Fed chair Jay Powell is a lot smarter than the bears give him credit for and the naysayers couldn’t be more wrong.
Yes, it’s true that we’ve seen a lot of inflation over the course of the pandemic. But Cramer reminded viewers that the stock market doesn’t care about the past, or even today. It’s looking forward into the future. And when you look objectively into the future, you see pricing peaking and even falling, not the other way around.
Just listen to the conference call of Delta Air Lines (DAL) – Get Report and you’ll hear that bookings are falling and cancelations are on the rise as COVID cases spike once again. Look closely at the auto market and you’ll see used car prices retreating as more new cars become available. The labor market is also cooling as federal unemployment benefits are ending and more people are returning to work.
Then there are falling raw material prices for lumber and copper. Oil also appears to have peaked, at least in the short term. Even the banks are reporting a decrease in consumer spending after a surge in restaurant and retail sales earlier this year.
Add it all up and it’s easy to see why Jay Powell is right. Our inflation is transitory and a wide swatch of our economy is already seeing prices retreat to more normal levels.
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At the time of publication, Cramer’s Action Alerts PLUS had no position in the stocks mentioned.