CNBC’s Jim Cramer said Thursday he expects the market to pivot to a bull market for recession-proof stocks rather than expensive growth stocks.
If the Federal Reserve decides to start an “inflationary spiral with higher [interest] interest, you should not buy expensive growth stocks. The hedge fund playbook says you should sell stocks like Amazon until the tightening cycle is almost over,” the Mad Money host said.
“We have a new bull market for recession-proof names that can still perform well in the face of a slowdown,” he added.
The Dow Jones Industrial Average gained 0.25% on Thursday, while the S&P 500 gained 0.43%. The tech-heavy Nasdaq Composite rose 0.06%.
Cramer also said he believes investors in general should avoid buying stocks of the biggest names in technology in the current market.
“I strongly believe that you have to be very conservative with the FAANG names and their ilk,” Cramer said. “Of all these growth stocks, the only two I would put fresh money into are Google parent Alphabet and Facebook parent Meta because they’re not expensive for next year’s earnings, he added.
FAANG is an acronym for Facebook, Amazon, Apple, Netflix and Google.
Cramer cautioned that a swing to a bull market will not happen immediately.
“Pivots don’t happen on a dime, even if it feels like it. This is very difficult because the entire stock market has long bowed to FAANG and his friends,” Cramer said. “It’s been a bull market in a handful of stocks, a bear market in hundreds, if not thousands, of others. Now the bear is turning into a bull and most of that will happen over the course of the next month.”
Disclosure: Cramer’s Charitable Trust owns shares of Meta, Amazon, Apple and Alphabet.