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Jim Cramer's guide to investing: Looking back at how the Fed handles economic downturns
Jim Cramer's guide to investing: Looking back at how the Fed handles economic downturns

CNBC

time3 days ago

  • Business
  • CNBC

Jim Cramer's guide to investing: Looking back at how the Fed handles economic downturns

CNBC's Jim Cramer reviewed several significant market downturns he's witnessed throughout his career and looked at the Federal Reserve's action during those moments. "Whenever the market goes into a tailspin, whether it's a Fed-mandated decline or if it's caused by the White House, or by the real weakness in the economy, you should try to understand why it's happening," he said. "Because that has a huge impact on what happens next, and it's often the key to saving, or losing, a ton of money." During his more than 40 years on Wall Street, Cramer said he's recommended "selling everything" four times. Once in 1987 just before historic "Black Monday" and "Terrible Tuesday" declines, then in 1998 when hedge fund Long-Term Capital Management was in crisis. He also advised investors pull out of the market in 2000 before the dotcom bubble burst, and then in 2008 as the collapse of the U.S. housing market triggered a devastating crash. Of these moments, Cramer said he only regrets his judgement in 1998. At the time, Cramer's own hedge fund was underperforming and investors were pulling money out, he said, adding that he sensed "a total collapse." Cramer said he believed the Fed seemed "oblivious to the situation" even as the spillover from Long-Term Capital Management's predicament threatened other banks. But shortly after Cramer recommended pulling out the market, the Fed stepped in. The central bank issued an emergency rate cut and helped bail out Long-Term Capital Management, staving off disaster. His call at the time was "perhaps the worst professional mistake of my life," Cramer conceded. He said he learned an important lesson — even if the Fed seems to be "asleep at the wheel," it can still change course at any moment, especially when the market is doing poorly. However, the Fed acted too late in 2008, Cramer said. While he said the downturn stemmed from the economy itself, the Fed made it worse with rate hikes. The agency believed the economy was strong, he continued, and it "couldn't see the rot underneath." Cramer said some major firms had already collapsed by the time the Fed started to cut and offered up "the mother of all government bailouts." "When I told people to get into cash in October of 2008, when the Dow was around 10,200, I got a lot of hate — the conventional wisdom was that I was being insanely irresponsible," he said. "Of course, if you listened to me, you sidestepped a hideous decline. The financial crisis was caused by genuine systemic risk, even if the very real problems were made worse by a clueless Federal Reserve." Click here to download Jim Cramer's Guide to Investing at no cost to help you build long-term wealth and invest

Evercore Sees Bear Market Ending, Bull Grind Begins
Evercore Sees Bear Market Ending, Bull Grind Begins

Yahoo

time13-05-2025

  • Business
  • Yahoo

Evercore Sees Bear Market Ending, Bull Grind Begins

The S&P 500's recent 2.6% surge signals a bear-market bottom and the dawn of a new bull cyclebut Evercore ISI's Julian Emanuel warns it won't be a straight line to the moon, but rather a choppy, back-and-forth grind. Emanuel draws parallels between today's tariff-tinged volatility and the shockwaves sent by Long-Term Capital Management's collapse in 1998. Back then, the Fed swooped in with rate cuts that propelled stocks to fresh highs almost overnight. Today, however, inflation remains stubbornly above target, the Fed is content to sit on its hands, and policy reversalsfrom Trump's pause on tariffs on April 9 to the dealhave only just begun to ripple through corporate supply chains. That 21.3% bear-market low feels more like a reset button than a launchpad, with headline risks still looming large. Rather than another Goldilocks rebound, Emanuel sees the S&P 500's path as a process marked by volatility. He expects tariff levels to land around 15%17%well below Trump's initial 80% pitch but still lofty by historical standardsand to remain a source of episodic risk. With no fast-track to dovish central-bank action and sticky inflation to keep yields elevated, each leg higher in equities may be met by profit-taking and policy anxiety. Evercore ISI's year-end target of 5,600 on the S&P 500 assumes a gradual grind upward into 2026 as markets adjust to a new normal of slower growth and policy uncertainty. Why it matters: Investors should brace for a bull market that rewards patience and tactical shifts more than buy-and-hold faith, as intermittent headlines on inflation, tariffs or Fed policy will likely trigger swift market pivots. This article first appeared on GuruFocus.

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