Jim Cramer's Insights on Fed Rate Cuts and Tech Stocks

Cramer explains what the Fed's rate cuts mean for tech stocks

CNBC's Jim Cramer on Wednesday discussed the repercussions of the Federal Reserve's interest rate cuts on the technology sector, saying he thinks they hinder tech stocks because the companies don't necessarily stand to benefit from lower rates. "With a double-sized rate cut that everybody already expected, you aren't gonna see a huge run in tech. It doesn't have the edge when we get the big cuts," he said. "Right now, the Fed's helping companies that need a healthy consumer." The Fed started of its cutting cycle strong, lowering rates by half a point and indicating it would cut by 50 more basis points by the end of the year. The move marks the first rate cut since the pandemic, and the Fed said in a statement that its decision came "in light of progress on inflation and the balance of risks." Cramer reflected on the time he's spent in San Francisco at enterprise software outfit Salesforce's annual conference, saying the tech companies at the event -- many of which are pushing artificial intelligence initiatives -- don't care about the Fed's cuts. Unlike companies in the retail or housing sector, large tech companies are largely divorced from the consumer and the labor market, and cater to the enterprise, he added. Big Tech and its peers are focused on AI automation that will boost companies' earnings and allow them to perform more work with fewer workers, he said. Consumer-oriented companies may be the ones to own during this cutting cycle, Cramer suggested, even though tech stocks can still be winners with rates coming down. According to Cramer, Wall Street abandons these secular stocks for ones that rely on lower rates, and there's only "so much cash to go around." He added that investors make a distinction between companies that do well most of the time and ones that can perform extremely well during certain points in the business cycle. "On days like today, we want the companies that desperately needed a rate cut, because they just got what they wished for," Cramer said. "But tech? It got out of the wish game a very long time ago."

Jim Cramer Predicts No 'Huge Run' For Tech Stocks After Federal Reserve Cuts Rate: 'It Got Out Of The Wish Game A Very Long Time Ago' - Apple (NASDAQ:AAPL), Broadcom (NASDAQ:AVGO)

Amid the Federal Reserve's recent decision to cut interest rates, CNBC's Jim Cramer has weighed in on how these changes might affect the technology sector. What Happened: Cramer discussed the Federal Reserve's recent interest rate cuts and their implications for the technology sector on Wednesday. He believes these cuts do not significantly benefit tech stocks. According to CNBC on Thursday, Cramer stated, "With a double-sized rate cut that everybody already expected, you aren't going to see a huge run in tech." He emphasized that the Fed's actions are more beneficial to companies reliant on a healthy consumer base. The Federal Reserve initiated its rate-cutting cycle by reducing rates by half a point and signaled an additional 50 basis points cut by year-end. This marks the first rate cut since the pandemic, aimed at addressing inflation and balancing economic risks. Cramer highlighted his observations from Salesforce Inc. CRM's annual conference in San Francisco, noting that tech companies, particularly those focused on AI, are less impacted by rate cuts. These companies cater to enterprises rather than consumers, distancing them from the labor market. See Also: Ethereum Co-Founder Says Donald Trump Is 'Certainly The Favorite' Over Kamala Harris For Crypto He suggested that consumer-oriented companies might benefit more during this rate-cutting cycle. Despite potential gains for tech stocks, Cramer noted that Wall Street often shifts focus to companies that thrive with lower rates. Cramer 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." Why It Matters: The Federal Reserve's decision to cut interest rates by 50 basis points marks a significant shift in monetary policy, breaking a streak of 12 consecutive months with rates held steady. This move aims to address inflation and balance economic risks. The rate cut has already impacted market sentiment, with the CNN Money Fear and Greed index showing improvement, moving into the "Greed" zone. Price Action: 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, as per Benzinga Pro. Read Next: Shiba Inu Team Says Launching K9 Finance Liquid Staking On Shibarium Tomorrow: Are SHIB Burns Set To Accelerate From Here On Now? Image via Shutterstock This story was generated using Benzinga Neuro and edited by Pooja Rajkumari Market News and Data brought to you by Benzinga APIs