CNBC host Jim Cramer says the market may be entering a more fragile stretch in the final months of the year. In his view, a familiar mix of rising oil prices, stubborn inflation and elevated interest rates is flashing a warning sign for investors.
Cramer compared the current setup with the autumn of 2018. He noted that in both periods, stocks had posted strong gains during the second year of President Donald Trump's term, while oil prices and U.S. Treasury yields were climbing, inflation was running above the Federal Reserve’s target, and a new Fed chair was weighing further rate hikes.
The fourth quarter of 2018, however, turned sharply lower. The S&P 500 dropped roughly 20% from its late-September peak through Christmas Eve as investors grew concerned about rising rates and escalating trade tensions with China.
Cramer believes similar risks are visible now. He pointed to oil near $100 a barrel, the 10-year Treasury yield approaching 5%, and inflation that remains above the Fed’s target. That, he said, is increasing pressure on new Fed Chairman Kevin Warsh as investors brace for a possible rate increase.
Even so, Cramer is not calling for another 2018-style collapse. He said Kevin Warsh appears less aggressive in fighting inflation than former Fed Chair Jerome Powell was at the time, and investors are also more familiar with how Donald Trump reacts when his policies put pressure on markets.
Rather than urging investors to sell everything, Cramer recommended a defensive but measured approach. He said those concerned about a pullback should trim some of their winning positions, effectively taking part of their profits off the table, while keeping cash available for future opportunities.
According to Cramer, if stock market volatility does pick up, investors should avoid panicking and instead be ready to use any weakness to buy high-quality stocks.
