The troubling signs from the stock market — rallies in recession-era favorites like utilities along with retailers along with breakdowns in economically sensitive stocks tied to construction along with housing — are all although lost on the Federal Reserve, Jim Cramer argued Monday.
“When I scrutinize the charts of, say, Weyerhaeuser, Vulcan Materials, Martin Marietta Materials, U.S. Concrete, Home Depot, Terex, United Rentals, Mohawk, PPG [along with] dozens of others which are involved from the construction … of housing in particular, which screams ‘slowdown,'” the host of CNBC’s “Mad Money” said. “Yet I honestly believe which if Fed chief Jerome Powell looked at these stocks, which might mean nothing to him.”
“He’s becoming like a racehorse with blinkers on,” Cramer continued.
This specific kind of widespread weakness from the housing sector has historically signaled “some definitely severe economic downturns,” Cramer warned.
Layer on the pain by mortgage rates of 5 percent, which Cramer suggested was something of a breaking point for the economy earlier on Monday, along with there could be severe implications for more than just the housing stocks, he said.
The 30-year fixed-rate mortgage rate was at 4.85 percent on Thursday, according to Freddie Mac, after spiking to 4.9 percent the prior week from the rising bond-yield environment. A year ago, the 30-year mortgage rate was at 3.88 percent.
“Perhaps the most egregious performers last week were the industrials, the perfect bookends to the collapse of housing because they’re under attack by both the trade war along with the Fed. Can you imagine?” Cramer said.
although the Fed, along with the market commentators who think the central bank can be correct to raise interest rates four more times, are willing to ignore the many negative signals strewn across the stock market, he said.
“Look, maybe these stocks are all wrong, every one of them. Maybe the fact which CSX went down after which fantastic quarter means nothing. Perhaps we shouldn’t even care about PPG [or] Wabash National. Maybe the Fed thinks which the action from the stock market can be arbitrary, capricious along with random,” he said.
If which’s the case, then Cramer’s earlier theory which the Fed could “blink” — in some other words, hike rates once more in December, as planned, along with then take a break to reconsider the economic format — can be unfounded, he warned.
“If which’s what Powell believes, then he’s not going to blink,” he told investors. “although if he’s more in touch with reality, This specific could be a great time to say, ‘We’ll reassess after the December rate hike.’ Those words could send us soaring higher, although whether or not we’ll hear them [can be] an open question.”