CNBC’s Jim Cramer on Wednesday advised investors to think twice before investing in digitization stocks amid the possibility of a recession looming over the market.
“You can’t justify owning these unless you believe in them [Federal Reserve] inflation will hit quickly without having to do much more to hurt the economy. I think that’s a real possibility, but I don’t want to bet on it by owning too many business services companies,” he said.
The Mad Money host’s comments come after the three major indices posted modest declines on Wednesday as investors remain fearful of the possibility of an economic slowdown.
Cramer said that while digitization is inevitable and the current turmoil in the economy is not on the same scale as the dot-com crash, a recession could deal an implacable blow to the industry.
“If the economy goes into a real recession — I mean major stagflation — the pool of potential customers is actually going to shrink. Digitizers can’t make as much money when their customers are cash-strapped,” he said.
Cramer added that a frozen IPO market could also lead to “serious deficits.”
“There won’t be enough new customers, many of the existing ones won’t have enough money and there are too many competitors in this space who may be fighting for a shrinking pie,” he said.
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