CNBC’s Jim Cramer said Tuesday that stocks could struggle to sustain recent gains unless the bond market cooperates.
The “Mad Money” host said, “Without the oxygen of lower interest rates, this stock market won’t be able to rise for long.”
The consumer price index on Tuesday beat expectations, with prices rising by a seasonally adjusted 0.6% in April, pushing annual inflation to 3.8%. U.S. Treasury yields rose in response to the report, with the two-year bond yield at one point reaching 4% as investors dialed back expectations for future Federal Reserve rate cuts. Higher inflation makes it harder for the Fed to cut interest rates because policymakers typically keep borrowing costs rising to prevent prices from rising too quickly.
Cramer said Tuesday’s rotation into previously underperforming sectors such as health care was encouraging, but it will be difficult to generate sustainable profits without lowering interest rates.
“If we don’t get the bond market on our side, we might just start trading,” he said.
Cramer argued that inflationary pressures from the Iran war are beginning to ripple through the economy, potentially delaying expectations for rate cuts further. He said rising oil prices are driving up costs across categories such as housing, services, food, clothing and gasoline.
“We need to recognize that war has done something that even tariffs have not done: raise prices across the board for average Americans,” he said.
he pointed to home depot This is to show how rising interest rates are already weighing on stocks that rely on lower borrowing costs. Mr. Cramer noted that he bought Home Deport, a portfolio used by CNBC Investment Club, for a charitable trust because he believed an eventual rate cut would support housing-related demand and boost stock prices. Home Depot traded at its lowest price since November 2023 on Tuesday.
“The hedge backfired,” he says.
Ultimately, Cramer said, the inflation reporting frenzy has narrowed the window for investors, making it increasingly difficult to sustain stock price gains without relief from lower borrowing costs.
“When you have this kind of inflation, it really reduces your chances,” he said.
