Just because the Federal Reserve has tightened, doesn’t mean Jim Cramer thinks caution should not be thrown to the wind.
“Sure, the market can go higher, but you have to be more skeptical of upward moves when money costs more, the true interpretation of a Fed rate increase,” the “Mad Money” host said.
That was why Cramer was more wary of the market containing its losses on Thursday, and he believes history is on his side. “It’s a sucker’s bet to wager against history,” Cramer added. (Tweet This)
Marty Zweig was one of the great titans of the financial industry that inspired Cramer, and millions of other people. Cramer credits Zweig’s work for inspiring him to join Wall Street and make money.
Central to Zweig’s core beliefs was his investing thesis of “don’t fight the Fed.” Meaning, when the Fed raises rates, investors must be aware that the wind has gone from your back to your face. He found that interest rate movements and Federal Reserve policy were dominant factors in determining the overall direction of the market. So when the Fed tightened, it was bearish for stocks and when it cut rates it was bullish.
But that doesn’t mean that it’s game over now just because the Fed has tightened.
Read more from Mad Money with Jim Cramer
Cramer Remix: Avoid these stocks after a rate hike
Chipotle execs: There is no E coli in Chipotle today
Cramer: That was it, Fed? Stocks get a juicy boost
Another principal that Cramer described is to be flexible and non-dogmatic. He did not want investors to leave the market when the Fed started raising rates — he just wanted them to be less positive.
“So now I’m less positive. I can’t help it. Marty made me too much money with that philosophy and I can’t go against it,” Cramer said.
Ultimately, Zweig taught Cramer not to fight the Fed, but to be flexible at the same time. Many stocks are still accessible and gains are obtainable if the proper homework is done.
Cramer recommended keeping an eye out for good companies and waiting until their stocks dip to bargain prices. Just don’t be as aggressive as you once were, and don’t let gains turn into losses because of overconfidence and greed.