Cramer says to ‘sit on your hands’ until the Fed makes a rate cut decision

CNBC's Jim Cramer said the best course of action is to hold off on making any moves until the Federal Reserve announces interest rate cuts.
"There's so much hot money coming out of tech and into non-tech, I don't want you to get in the way of that, because without a half-point cut, I'd say that the non-tech part of the stock market will have suddenly become overvalued," he said.
He suggested that if the Fed decides to cut rates by 0.25%, investors will shift back into tech, and Monday's winners will suffer.

CNBC's Jim Cramer on Monday opined on the fickle nature of this market, telling investors the best course of action is to hold off on making any moves until the Federal Reserve announces interest rate cuts.

"I know it's boring. I want you to sit on your hands," he said. "There's so much hot money coming out of tech and into non-tech, I don't want you to get in the way of that, because without a half-point cut, I'd say that the non-tech part of the stock market will have suddenly become overvalued."

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While Wall Street widely expects the Fed to cut rates after its meeting later this week, it remains up in the air how large the cut will be. Some expect a 25 basis-point cut, while others are hoping for a 50 basis-point cut. September's cut would be the first time the Fed lowered rates since it began its hiking cycle in March of 2022 to combat inflation.

By close, the S&P 500 eked out a 0.13% gain, while the Dow Jones Industrial Average gained 0.55% to reach a new all-time high. The tech-heavy Nasdaq Composite declined 0.52%. According to Cramer, investors took profits in tech and bought cyclical stocks because many anticipate a higher rate cut. A 50 basis-point cut would likely spell good news for cyclicals like housing stocks because it would push mortgage rates down — and Cramer noted that industry leaders Lennar and Toll Brothers both hit a new 52-week high on Monday.

To Cramer, there's not enough capital on the market. So investors have to sell high-performers like tech to fund other investments, he said, adding that they're not letting go of tech stocks because businesses in the sector are struggling. He suggested that if the Fed decides to cut rates by 0.25%, investors will shift back into tech, and Monday's winners will suffer. All of this uncertainty means that the market is "at a difficult juncture," he said.

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"If we only get a quarter-point cut, all of that money that came into non-tech hoping for immediate better times? It flows right back to where it came from: The tech stocks that got sold today," he said. "It's silly. It's infantile. It's confusing. It's a total impenetrable mess unless you've seen it before. Take it from a grizzled veteran: Don't try to chase this move, it's not worth it."