CNBC’s Jim Cramer said Wednesday he sees a number of worrying factors that are likely to contribute to market volatility in September, beyond the fact that it’s a historically tough month for equities.
Here’s what the “Mad Money” host is worried about:
1. Negative pre-announcements
This week, three companies, paint makers PPG Industries and Sherwin-Williams, as well as home builder PulteGroup, issued early announcements to reduce indications about their current quarters, warning that supply chain problems and material costs are causing challenges that could worsen. results of what was expected.
“The good news? None of their shares were crushed because demand is still in good shape … They’re still doing business,” Cramer said. “The bad news? These supply problems, they won’t go away, they seem to have taken root.”
2. The Fed
Pressure on Federal Reserve Chairman Jerome Powell to change his stance that inflationary pressures are transient could intensify throughout September, Cramer said.
While this view is why the Fed’s highly accommodative monetary policy is maintained, Cramer said that “after these advance notices in which we continue to hear about rising gross costs, you don’t have to to ask if inflation is more intractable than they thought? ”
Raising interest rates would be the magic elixir to curb inflation, Cramer said. “But they do it by destroying demand and crushing profits, which in turn crushes stocks.”
3. Higher rates
“If rates go up, that creates more competition for high-yield dividend stocks. Today, there aren’t many stocks backed by their returns, but there will be even less if rates go up,” Cramer said.
4. Congress
The host of “Mad Money” said there is a bit of a double cut involving the Democrats’ desire to approve the $ 3.5 trillion budget reconciliation package.
That level of spending would surely create jobs and “outperform the economy,” Cramer said, but it comes at a time when there are already more than 10 million jobs in the United States. As a result, wages would likely increase as companies fight for workers, he said, “which is good if you work for a living, but it’s bad if you have stocks.”
“However, if you kill this big package of incentives, the investors who depend on them and what you would do to the companies they own, well I have to tell you that these people would be disappointed. Without that, you can’t target the cycles.” said Cramer.
5. New supply of stocks
New companies that are listed on the stock market through special purpose acquisition companies or traditional IPOs add stock supplies to the market, which can serve “like a wet blanket that pushes buyers’ fire, ”Cramer said.
“Of course, this IPO cycle will end up developing as they always do: with a sale that reduces all prices to levels where stocks are more attractive,” Cramer said. “It looks like we can’t stop this flow of chords.”
6. Geopolitical concerns
Cramer said he remains concerned about China and the unpredictability of President Xi Jinping, especially with regard to Taiwan, which plays a crucial role in the global semiconductor industry.
“Here’s the conclusion: in the end, I think we can address any of these issues, but not all at once, at least not without lower stock prices,” Cramer said. “And the lowest stock prices are what September is all about.”