the Fed on Wednesday, inflation and stock picks


CNBC’s Jim Cramer does not expect the Federal Reserve to cut interest rates at its meeting on Wednesday.

“I’m expecting a statement from [Chairman] Jay Powell where he explains that he’s watching the situation closely [and] he’s prepared to cut rates next month if things deteriorate,” the “Mad Money” host said. “I regard that as the most likely outcome, and perhaps the most positive outcome too.”

Cramer said he wants to see the benchmark funds rate reduced from its current 2.25% to 2.5% range, but he thinks a rate cut “might freak people out that we need one right now, right here.” He said Powell is in a tough predicament where he needs to consider how another tariff hike on Chinese goods could impact inflation, while balancing the fact that the tariffs will put a dent in the economy.

The Fed should raise rates when inflation goes up, but act to spur more investing when the economy begins to slow down, he said.

“I do worry that we may eventually see some inflation from the tariffs, as they’re inherently inflationary, but there’s a difference between a tax increase, which is what tariffs are, and organic inflation,” Cramer said.

Cramer said he thinks it will take a while for tariff-related inflation to kick in, but the slowdown is here.

While the steel industry has not felt the impact of billions of dollars worth of duties on imports from China, steel prices are down anyway. There has been no pick up in retail, he added.

“So the Fed’s choice is easy. If stocks are going to keep climbing, we need to hear words like ‘monitoring,’ words like ‘vigilance,’ words like ‘cognizant,’ words like ‘concerned,'” he said.

“And I think we’ll get that cautious wording, which is positive for the stock market because after last December’s bruising, Jay Powell understands the situation a lot better than the armchair analysts who act like this is some kind of tough call.”

Get his full thoughts here.

The idea that stocks can be ‘fun’

Traders and financial professionals work on the floor of the New York Stock Exchange (NYSE) ahead of the opening bell, January 4, 2019 in New York City.

Drew Angerer | Getty Images

A new generation of investors is getting the impression that owning individual stocks can be “fun and it can be rewarding,” Cramer said.

The prior demographic, particularly the millennial cohort, learnt that buying individual stocks is “too risky,” he said, due to the skyrocketing valuations of internet companies before the turn of the century. That’s when people gravitated toward buy-and-hold index funds, he added.

The key is knowing what you own, Cramer said.

“This idea that investing can be fun is a throwback, not to the dotcom bubble in 1999, but to the ’80s and ’90s, where you had some incredible bull runs and no one thought it was just horrible and stupid to like stocks,” the host said. “And if that’s the case, well guess what: the rally could last a lot longer than most people expect.”

Read more here.

The taste of opportunity

Andreas Fibig, CEO of IFF

Adam Jeffery | CNBC

International Flavors & Fragrances CEO Andreas Fibig told CNBC Monday that although his company has a lot of international business, they have been “lucky enough” to avoid business blows related to Brexit and China tariffs.

“So we have planned for Brexit. I think we have plan A, B and C, and you need all these plans — I can tell you,” he said in a one-on-one interview with “Mad Money” host Jim Cramer. “And China is very benign to us. It’s not material on our side right now.”

Read more here.

Pet check-up

Stewie the Yorkie Chihuahua is seen outside the New York Stock Exchange ahead of the IPO for Chewy Inc., June 14, 2019. REUTERS/Andrew Kelly

Andrew Kelly | Reuters

Cramer shuffled the hypothetical, pet care-focused exchange-traded fund he assembled last year.

He rebalanced his “Humanization of Pets ETF,” which covers 10 names in the sector and, while not an actually listed ETF, has helped the “Mad Money” host track the segment.

Cramer added three new stocks, removed two and reweighed two existing members. The bucket of stocks is up about 5% since its August inception, outpacing the S&P 500’s 2.6% return in that same span, he said.

In 2019, however, Cramer’s Pets ETF is up about 25%, topping the S&P’s 16% run, he added.

“The humanization of pets has been a fabulous secular growth story — one that’s really paid off in 2019,” the host said. “And now that we’ve adjusted our Mad Money Pets ETF, I bet it can keep going higher.”

Learn more about the sector here.

Cramer’s lightning round: Buy Aqua America — ‘Very steady, very good’

In Cramer’s lightning round, the “Mad Money” host zips through his thoughts on callers’ stock picks of the day.

Universal Display Corp.: “This one is too risky for me.”

Aqua America: “Very steady and very good. Fifty-two-week high regularly.” Buy, buy, buy.

Insperity: “We did a piece on Insperity saying ‘what the heck, how could it keep going up? Looks like it would mark the top, unfortunately.’ But I’m sticking by it. Human resources staffing is good story. Obviously, Workday is my real HR play. “

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