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Cramer on buying growth stocks after inflation scare shakes up market

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CNBC’s Jim Cramer pointed out that market participants have two ways to approach soaring growth stocks that were moving through a volatile session on Wall Street on Tuesday.

Investors can participate in the sell-off that put some tech names like Apple into negative trading territory this year.

The other way to orientate itself on Jerome Powell’s renewed commitment to keeping interest rates low is to keep the pace and consider loading worthy stocks discounted from their highs, Cramer said after the market closed mixed.

“After today’s upswing in the late afternoon, it’s not too late to sell the more expensive stocks if you want,” said the Mad Money host. “But for the stocks with better growth, which are more than 10% below their highs, call me a buyer. Not all of a sudden, not big, but still a buyer every time the 9:47 a.m. low retests that we saw today. “”

Cramer’s assessment of the current market situation follows a roller coaster trading day as major US averages bounced off their session lows. The market suffered a sharp sell-off in the morning, with the Nasdaq Composite dropping nearly 4% at its bottom before the blue-chip Dow Jones and benchmark S&P 500 posted modest gains at close of trading.

The Dow was up more than 15 points to 31,537.35, up 0.05%. The S&P 500 rose 0.13% to 3,881.37, ending its losing streak by five. Tech-heavy Nasdaq couldn’t hold up enough for a positive day, falling 0.5% to 13,465.20, prolonging losses on Monday.

“I’m glad to have the idea that you have to call the registry here, but I like growth stocks on a reflation scare. I like growth stocks when the risk is there. I like growth stocks when the risk is not,” Cramer said.

“If you want to hold onto the growth stocks … you have to be willing to endure some pain, just like in late 2015 and early 2016 – that was the last big moment to buy those stocks – or you can just sell something, though You want to try and get back on at a lower level, “he added.

The market has gone through a rotation as investors traded growth and technology stocks that outperformed during the pandemic for value games from companies that are expected to generate a business return as the economy reopens. The Nasdaq is now 4.5% below its closing high earlier this month.

Concerns that a rebound in inflation could cause the Fed to hike rates, as it did twice in a three-month period between 2015 and 2016, has been keeping investors away from growth stocks in recent days, Cramer said. Higher interest rates pose a challenge to growth and utility stocks.

Apple, Salesforce, and ServiceNow share prices are down at least 3% this week.

However, during an appearance before Congress Tuesday, Powell told lawmakers that inflation will remain “soft”, the labor market is facing persistent challenges and that the central bank is committed to its current monetary policies.

This calmed investors on interest rates and helped the market offset some of the losses.

“This time around, our Fed chief has vowed to delay the rate hike – too many unemployed – but there will be a time and point when these growth stocks will be a little hopeless,” Cramer said. “They’ll look like they do today … before people came in to buy.”

Correction: This story has been updated to reflect the correct number of points the Dow advanced.

Disclosure Cramer’s nonprofit owns shares in Apple and Salesforce.

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Robert Dunfee