CNBC commentator Jim Cramer said investors should avoid joining stock sellers ahead of the next U.S. Federal Reserve meeting. In his view, markets are once again following what he calls a “big bad event” pattern, in which a scheduled catalyst creates enough uncertainty to trigger selling before the event, only for stocks to rebound once it has passed.
On Wednesday, the Federal Reserve raised interest rates by 0.25 percentage point, its first increase in three years. That brought the benchmark rate to a range of 3.75% to 4%. Cramer noted that stocks had fallen in seven of the eight sessions leading up to the decision, before rebounding on Thursday.
He said that pattern helps explain both the sell-off before the meeting and the rally that followed. According to Cramer, similar trading behavior was common decades ago, when uncertainty around major bond auctions and Fed decisions weighed on markets for several days beforehand, with investors often returning after the event.
Cramer expects that setup to matter more if the Federal Reserve keeps raising rates. The central bank’s next policy meeting is scheduled for Oct. 27 and 28, and he argued that every Fed meeting from now on is likely to be treated as another “big bad event” by the market.
Still, he said most investors should not try to time the downturn by dumping stocks before the meeting. Instead, those looking to put money to work may want to use weakness closer to the decision as an opportunity, while staying selective about the stocks they choose.
“If you want to do some buying, buy as close to the meeting as possible, and then buy more immediately after the meeting,” Cramer said. “That way you’ll participate in the post-event rebound.”
He pointed to technology stocks as one area where investors could return after the meeting. Cramer also reiterated his support for cybersecurity companies, as well as Intel and Micron. He noted that Cramer's Charitable Trust, the portfolio run by CNBC’s Investing Club, owns shares of Intel and Micron.
