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Stay invested whenever Fed hikes rates, stocks can still rally

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CNBC’s Jim Kramer on Friday urged investors to stay in the market despite concerns about a potential change in the Federal Reserve’s hawkish policy.

“The Fed may no longer be your friend, but he also has not become your enemy, and if the last tightening cycle is any guide, he will not do it for a long time,” the “Crazy Money” facilitator. said.

Kramer’s comments on Friday follow government figures released earlier that day, which showed inflation rose in its fastest clip since November 1982, and jumped more than expected from 6.8% year-on-year. The Consumer Price Index report arrives just days before the Fed’s policy-making arm holds its last meeting of the year on Tuesday and Wednesday.

Fed Chairman Jerome Powell has already signaled that the central bank could speed up the completion of its bond buying program. .

The prospect of higher interest rates may frighten markets, Kramer said, but he stressed that investors should keep in mind that even recent history shows that this is not the end of the world for stocks.

“If you look at the whole period from mid-2015, when we started hearing chatter of interest rate hikes like now, from then-Fed chief Janet Yellen, to September 2018, when J. Powell was just eight, he declared war on almost the entire economy. The stock market has run a run. Amazing, “Kramer said. “The S&P was up 41%, the Dow was up 50%, and the Nasdaq was up 61%.

To be sure, Kramer said central bank policy could ruin the stock market, such as towards the end of 2018. But the damage usually occurs in the later stages of the tightening cycle, “not near the beginning where we are,” he said.

“If you sold stocks in 2015 because you worried about an expected series of interest rate hikes and many did, you missed out on some huge gains in the next three years,” he said.

Market positioning gets paramount when the Fed starts tapping on the brakes, Kramer said.

“As we approach 2022, you want to own companies that produce tangible things, sell them at a profit, especially if they return those profits to shareholders through dividends and repurchases,” he said.

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