CNBC’s Jim Cramer said Thursday that investors who believe the Federal Reserve can get a soft landing should have bank shares on their shopping list.
“If you think we’re heading for a full-blown recession, it’s okay to avoid banking. But if you’re like me and you think the Fed can do a little needlework and design a not-so-amazing engineering. -Strong landing , then these companies will make a fortune with higher rates, “he said.
Host “Mad Money” highlighted three bank shares specifically as purchases.
Here is the list:
- Wells Fargo
- Morgan Stanley
- bank of america
“At these levels, I think Wells Fargo, Morgan Stanley and Bank of America are already reflecting concerns about the recession, but they are not reflecting the rising gains in Fed rate hikes … That’s why it’s worth buying -los, “he said.
His comments come after the Fed raised its benchmark interest rate by 75 basis points on Wednesday, marking the biggest jump since 1994.
While stocks rose after Powell’s announcement, earnings from the bank’s shares were modest. Major indices reversed gains on Wednesday and then some on Thursday.
Cramer said banks’ shares should have recovered more than the day the Fed announced, as an environment with higher interest rates is often good news for banks.
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“Every time the Fed hardens, it means banks can take your deposits and instantly get higher returns without risk by putting them in short-term Treasury bonds,” he said.
“Of course, a Fed-ordered slowdown will also hurt banks (more defaults, less loan demand), but I think any potential weakness will be far more than offset by these much higher net interest margins,” he added.
Disclosure: Cramer’s Charitable Trust owns shares in Wells Fargo and Morgan Stanley.
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