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Cramer says stay invested whenever the Fed hikes rates, history shows stocks can still rally

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CNBC’s Jim Cramer on Friday urged investors to remain in the market despite concerns about a potential hawkish policy shift from the Federal Reserve.

“The Fed may no longer be your friend, but it hasn’t turned into your enemy either, and if the last tightening cycle is any guide, it won’t do that for a very long time,” the “Mad Money” host said.

Cramer’s comments Friday follow government data released earlier in the day that showed inflation rose at its fastest clip since 1982 in November, jumping a more-than-expected 6.8% year over year. The consumer price index report comes a few days before the Fed’s policymaking arm holds its final meeting of the year on Tuesday and Wednesday.

The Fed’s chief, Jerome Powell, has already signaled the central bank could accelerate the winding down of its bond-buying program. After Friday’s CPI print, Cramer said he wouldn’t be surprised to hear Powell talk Wednesday about the Fed’s rate hike agenda.

The prospect of higher interest rates may spook markets, Cramer said, but he stressed that investors need to remember that even recent history shows it’s not the end of the world for stocks.

“If you look at the whole period from the middle of 2015, when we started hearing rate-hike chatter like now from then Fed-chief Janet Yellen, through September of 2018, when the newly appointed Jay Powell practically declared war on the entire economy, the stock market had an incredible run,” Cramer said. “The S&P gained 41%, Dow gained 50%, and Nasdaq gained 61%.”

To be sure, Cramer said central bank policy can wreck the stock market, such as toward the end of 2018. But the damage typically occurs in the late stages of a tightening cycle, “not near the beginning where we are,” he said.

“If you sold stocks in 2015 because you were worried about a looming series of rate hikes and many did, you missed out on some tremendous gains over the following three years,” he said.

Market positioning becomes of the utmost importance when the Fed starts to tap the brakes, Cramer said.

“As we head into 2022, you want to own companies that make tangible things, sell them for a profit, especially if they return those profits to shareholders via dividends and buybacks,” he said.

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