Jim Cramer says history offers a playbook for navigating a Fed rate-hiking cycle — SkimNews
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- Federal Reserve raised its benchmark rate by a quarter percentage point to a 3.75%-4% range on Wednesday — its first increase in three years — with Chairman Kevin Warsh saying inflation 'has been for too long' and the hike would support a quicker return to the 2% target.
- Jim Cramer cited Deutsche Bank head of macro research Jim Reid, noting the previous 14 rate-hiking cycles averaged 22 months (median 15 months) while recessions averaged 42 months from the first hike — and sometimes never materialized at all.
- Defensive sectors including utilities, consumer staples, and healthcare held up best in the first six months of the March 2022 tightening cycle, while technology was among the worst performers, according to Cramer.
- Technology stocks flipped from one of the biggest laggards to one of the strongest sectors over the full 2022-2023 hiking cycle through July 2023 as the Magnificent Seven rallied, Cramer said.
- The 2015-2018 cycle showed the same pattern: utilities, consumer staples, and real estate initially outperformed after the December 2015 hike, but technology led the full cycle through December 2018.
- Cramer flagged triple-digit oil prices driven by the war in the Middle East as an inflationary wildcard this cycle, noting a decline in crude could ease pressure and reduce the need for additional hikes.
Why it matters: Cramer's historical analysis argues that the first rate hike doesn't doom equities — the average gap to recession is 42 months versus a 22-month average hiking cycle window. For stock pickers, the playbook is rotating from defensive sectors into beaten-down tech once a cycle matures, not abandoning the market while the Fed tightens.
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