On Tuesday, CNBC’s Jim Kramer was moved by Treasury Secretary Janet Yellen’s idea that rising inflation could lead to higher interest rates.
“At the moment, however, even though I can fully see and feel inflation from all sides, I stick to Jay Powell as my quarterback,” the Crazy Money presenter said, referring to the Federal Reserve chairman. Kramer noted that Powell insists the rate hike is unlikely until the job market recovers from last year’s downturn.
“I think Yellen is reminiscent of her worst conversation at the Fed when she decided to tighten up in December 201
The Treasury Department did not return CNBC’s request for comment.
Yellen said earlier in the day that they may need to rise “somewhat to make sure our economy doesn’t overheat.” These comments contributed to an unstable session on Wall Street.
The Dow Jones industrial average made a small profit, bouncing down 347 points earlier in the session. The S&P 500 and Nasdaq Composite closed the session on Tuesday with 0.7% and 1.9%, respectively.
Tuesday’s moves and Yelen’s remarks are coming as commodity prices – a leading indicator of inflation – rise. U.S. oil prices, for example, have risen more than 17 percent in the past three months and jumped nearly 12 percent in the past month.
Rising commodity prices are bad news for most companies, but investors can adjust their portfolios to stocks that can benefit the environment, Kramer said.
“You have to realize that we are in a forgiving market. Investors like to buy high-quality stocks that are declining,” he said. “There will be winners and losers. Our job is to try to pick the winners, just as buyers chose the industrialists at the bottom of today’s market.”
Cramer, meanwhile, has suggested ideas for stocks that could benefit from rising raw material costs. Among these winners are copper company Freeport-McMoRan and steelmakers Cleveland-Cliffs and Nucor. Shares of Cleveland-Cliffs rose nearly 12% on Tuesday. All three stocks have risen about 40% or more this year.
“They do the same thing they always do, but their sales prices continue to rise,” he said. “This gives them what is called operational leverage, where any increase in revenue leads to a huge increase in profits.”
Kramer also advised that stocks such as Kroger and Albertsons could do harm if inflationary pressures continue. He added that rising raw costs are hitting companies like DuPont hard.
Disclosure: Cramer’s charity trust owns shares in DuPont.
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