Companies and the Fed Should Be More Cautious with Predictions, Says Jim Cramer
CNBC’s Jim Cramer reviewed recent market action, attributing some of the downturn to faulty predictions. He emphasized that companies and the Federal Reserve should only make predictions when they are well within reach. Cramer believes that unmet expectations and aggressive guidance drove some of the recent sell-off, as investors were disappointed by the Fed’s commentary after it cut rates by 25 basis points.
The Federal Reserve’s indication that it intended to make two cuts next year, rather than the four cuts it had previously hinted at, led to a negative reaction from Wall Street. Cramer suggested that the Fed should have been more cautious and maintained its data-driven approach to decisions. He believes that recent economic data did not justify the cut and that Fed Chair Jerome Powell was “trapped by his own prediction.”
Cramer also pointed to Micron’s earnings call, where the company was overzealous in its predictions about the PC business. However, during the call, Micron revealed that the PC refresh cycle is “unfolding more gradually” and issued weaker-than-expected guidance. The company’s shares plummeted by over 16% as a result. Cramer suggested that the loss might not have been as severe had expectations been lower.
In the world of Wall Street, Cramer believes that if a company makes a prediction, it must beat it, or else its stock will suffer. He advises companies to be more cautious with their predictions and to only make them when they are well within reach.