CNBC’s Jim Cramer said Friday that the familiar combination of rising oil prices, stubborn inflation and rising interest rates is raising red flags for investors heading into the end of the year.
“At the end of the day, there are some eerie similarities between this moment and the fall of 2018,” the “Mad Money” host said. “I don’t think history will repeat itself this time, but there could be a rhyme, and that’s something we’ll have to keep an eye on.”
Kramer pointed out that there are some similarities between 2018 and 2026. In both periods, stock prices rose significantly during President Donald Trump’s second year in office, while oil prices and Treasury yields rose, inflation exceeded the Fed’s target, and the new Fed chairman was considering further rate hikes.
However, the fourth quarter of 2018 was tough. of S&P500 Stocks fell about 20% from a high in late September to Christmas Eve as investors worried about rising interest rates and escalating trade tensions with China.
Cramer sees similar risks now that oil is nearing $100 a barrel. 10 year treasury Yields are nearing 5% and inflation remains above the Fed’s target. Pressure is mounting on new Federal Reserve Chairman Kevin Warsh as investors anticipate a potential interest rate hike.
Still, Kramer doesn’t expect a repeat of the 2018-style collapse. He said Warsh appears to be less aggressive in combating inflation than then-former Fed Chairman Jerome Powell, but investors are also well aware of how Trump would react when his policies put pressure on markets.
“I’m not saying you should sell everything because history repeats itself,” Kramer said. “Kevin Warsh was there in 2018, and he’s probably not going to repeat Powell’s mistakes.”
Instead, he recommended investors prepare for potential volatility by paring back some winning positions and keeping cash available.
“If stocks start to skyrocket, there’s no need to panic,” Cramer said. “If you’re worried about a repeat of 2018, narrow down the winners and take things off the table. That’s what we’ve been doing with charitable trusts. If you don’t panic and have enough cash balances in reserve, you can take advantage of any weakness to buy blue-chip stocks.”
