Investors buy tech stocks to hedge inflation and Fed rate hike
Fund managers have started to look to tech stocks as a hedge against inflation and Fed rate hikes, CNBC’s Jim Cramer said Tuesday.
Rising gross costs led to a 5.4% increase in inflation last month, the biggest increase in consumer prices in more than a decade.
This has raised concerns among some investors that the Federal Reserve may raise interest rates sooner than expected to fight inflation, Cramer said.
âIf you want an industry immune to both inflation and a Fed-induced downturn, well, that’s big-cap tech,â Mad Money host said after the market closed. .
“Hyper-growing tech stocks are actually what work best in a downturn.”
Despite the inflation figure, the market barely reacted as Wall Street expected to see a jump in the consumer price index, Cramer said. The major US averages all fell from yesterday’s record close as the Dow Jones Industrial Average fell more than 100 points.
Investors are also keeping an eye on the start of the earnings season.
Many companies cannot afford to pass their higher costs on to the consumer because people will rebel. Likewise, not everyone can handle a sudden rise in interest rates, which many fund managers are betting on. Cramer argued it was unlikely.
“I do not think so [Fed Chair Jerome] Powell is going to change his position, but there are a lot of fund managers who disagree, “he said.” When we see a [inflation] number like this, they sell a lot of other things and they buy technology. “
This explains a breakthrough in the commerce of big names in technology like Alphabet, parent company of Google, and Microsoft, the software giant. Their businesses are not adapting to changes in inflation, including rising prices for gas, plastics, packaging and the like, Cramer said.
Alphabet shares rose 0.29% to close at $ 2,546.83, while Microsoft came in at $ 280.98, up 1.3% in the session.
Apple, which makes a range of devices, can be negatively affected by higher hardware costs. But the brand does sell and those costs can be borne by its customers, Cramer said. Apple stock was up 0.8% to $ 145.64 on Tuesday.
Cramer said a stock like PepsiCo is an exception in the consumer packaged goods business. While the company will face higher input costs, including packaging and shipping, it may pass them on to consumers in the form of higher prices for drinks, crisps and other products. , did he declare.
Pepsi shares rose 2.3% to close at $ 152.96 after the company released a strong earnings report and raised its outlook.
Disclosure: Cramer’s charitable trust owns shares of Microsoft, Apple and Alphabet.