Famed investor Jim Cramer does not agree with the US Treasury Secretary Scott Bessent on continued weakness in US stocks.
Bessent is comfortable with a more than 10% decline in the benchmark S&P 500 index over the past month since corrections are “normal” and healthy”.
However, a former hedge fund manager disagrees with Bessent as typical explanations don’t apply to the ongoing decline in US stock prices.
Why the 2025 market correction isn’t normal or healthy
Cramer sees the correction this year as not related to the new administration’s “transition to a more prudent spending philosophy.”
Instead, the US equities market is grappling with losses due to recession fears – one that are “caused by the President of the United States,” he argued last night on Mad Money.
Cramer attributed the sell-off to “mercurial postings, the scattershot approach to trade policy,” adding “I ask you Mr Secretary, with 35 years of experience, is that normal? Is that healthy?”
More importantly, the former hedge fund manager said the ongoing choppiness is not very likely to subside unless Americans start to get some certainty from the White House.
The benchmark S&P 500 index currently sits at about 5,600 level versus its high of 6,150 on February 19th.
Top reasons why an economy crashes into a recession
Typical reasons for market corrections include geopolitical instability, a change in the Fed’s stance, or hyper-optimism leading to overvaluations.
However, the sell-off this year is mostly related to Americans not getting any signs of certainty from the Trump administration, according to Jim Cramer.
Interestingly, the famed investor supports President Trump’s use of tariffs to win better trade deals with other countries, but the rhetoric, he added, has been so erratic that it has sent investors into shock.
Neither the US Treasury Secretary nor the White House has so far responded to Cramer’s remarks.
Bank stocks are worst to own during a recession
While the former hedge fund manager has accused President Trump of trying to “manufacture” a recession several times in recent weeks, he’s still not convinced that the US economy will see one.
But if the United States does indeed end up in recession in the back half of 2025 as many believe it will, the hardest hit industry will likely be banking, he said in a recent CNBC appearance.
Jim Cramer recommends pulling out of bank stocks if you’re betting on a recession ahead.
Why? Because individuals and businesses refrain from taking loans during economic slowdowns.
Plus, an increase in defaults is typically a feature of a recessionary period as well.
Together, such developments stand in the way of bank stocks attempting to ride north during economic slowdowns.
On the plus side, however, most of them are dividend payers making up for good sources of passive income amidst challenging times.
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