Amidst the Federal Reserve’s recent decision to cut interest rates, CNBC’s Jim Cramer has shared his insights on how these changes might affect the technology sector. While the move is seen as a positive step for the economy, Cramer doesn’t believe it will lead to a major surge in tech stock prices.
Speaking on Wednesday, Cramer explained that the rate cuts, which are aimed at combating inflation and mitigating economic risks, are more likely to benefit companies that rely heavily on consumer spending. He emphasized that the cuts are a double-sized reduction that was already anticipated, stating, “With a double-sized rate cut that everybody already expected, you aren’t going to see a huge run in tech.”
Cramer’s observations are rooted in his experiences at Salesforce Inc.’s annual conference in San Francisco. He noted that tech companies, particularly those focused on artificial intelligence (AI), operate in a realm less affected by rate cuts. These companies primarily cater to enterprises rather than individual consumers, placing them at a distance from the fluctuations of the labor market. This suggests that consumer-oriented companies might experience greater advantages during this rate-cutting cycle.
While tech stocks might see some gains, Cramer pointed out that Wall Street tends to shift its focus towards companies that thrive in an environment of lower interest rates. He concluded, “On days like today, we want the companies that desperately needed a rate cut, because they just got what they wished for. But tech? It got out of the wish game a very long time ago.”
The Federal Reserve’s decision to cut interest rates by 50 basis points represents a significant shift in monetary policy, ending a streak of 12 consecutive months with rates held steady. This move is intended to address inflation and balance economic risks. The rate cut has already had an impact on market sentiment, with the CNN Money Fear and Greed index showing improvement, moving into the “Greed” zone.
The Invesco QQQ Trust, Series 1 QQQ, which tracks tech players like Apple Inc. AAPL, Microsoft Corp. MSFT, Nvidia Corp. NVDA, Broadcom Inc. AVGO, and others, was trading 1.67% higher during the pre-market at $479.33, while it closed at $471.44, according to Benzinga Pro.
