Cramer feels “powerless”
Mad Money host Jim Cramer has been feeling “powerless” lately. He’s been quite vocal in insisting that the Fed should tread cautiously, meaning that it should read the economy and give up on further tightening for now.
Equity markets in free fall
In This, Not the Rate Hike, Spooked the Markets Yesterday, we mentioned that the equity markets (IVV) tanked on December 19 after the rate hike and the Fed’s outlook, and it continued in free fall mode yesterday. The Dow Jones Industrial Average Index (DIA) fell to a 14-month low. The S&P 500 Index (SPY) has dropped more than 10% this month alone.
Cramer recommends buying into “bull market” in gold
While Cramer believes that sooner or later, the weakness will lead the Fed to change course, which is a reason to own stocks, he admits that right now, “the odds simply do not favor stockholders.” He said if investors are still buying stocks, they’re betting that Powell will learn that the economy has weakened enough.
Cramer therefore argues that if Powell stays the course of tightening, investors should buy into the “bull market” in gold. He likes Randgold Resources (GOLD), a mining play with a 3% yield and steady production growth. He also recommends the SPDR Gold Shares ETF (GLD), the largest gold-backed ETF, which mirrors the price of gold.
Read Could Market Risks Bring Investors Back to Gold in 2019? for more on gold’s price drivers and their outlooks for 2019.