CNBC’s Jim Kramer said Thursday that investors who believe the Federal Reserve can make a soft landing should have bank stocks on their shopping list.
“If you think we are on the verge of a complete recession, it is right to avoid bank stocks. But if you’re like me and you think the Fed can actually make a little needle and create a not-so-incredibly difficult emergency landing, then these companies will make a fortune at higher rates, “he said.
The host of “Mad Money” highlighted three bank shares specifically as purchases.
Here is the list:
- Wales Fargo
- Morgan Stanley
- Bank of America
“I think at these levels, Wells Fargo, Morgan Stanley and Bank of America are already reflecting concerns about the recession, but they are not reflecting the gains from the Fed’s interest rate hike. “That’s why it’s worth buying,” he said.
His comments came after the Fed raised its key interest rate by 75 basis points on Wednesday, marking the biggest jump since 1994.
As shares rose after Powell’s announcement, bank profits were modest. The main indexes turned the gains from Wednesday, and then some on Thursday.
Kramer said bank stocks should have risen more than on the day of the Fed’s announcement, as a higher interest rate environment is often good news for banks.
Selection of stocks and investment trends by CNBC Pro:
“Every time the Fed tightens up, it means banks can take your deposits and then immediately earn a higher risk-free return by putting them in short-term treasures,” he said.
“Of course, the delay imposed by the Fed will also hurt banks – more defaults, less demand for loans – but I think any potential weakness will be much 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.
Sign up for the CNBC Investing Club now to follow every move by Jim Cramer in the market.
Rebuttal
Questions about Cramer? Call Cramer: 1-800-743-CNBC
Want to dive deep into Kramer’s world? Hit him! Crazy Money Twitter – Jim Kramer Twitter – Facebook – Instagram
Questions, comments, suggestions about the “Mad Money” website? madcap@cnbc.com
Add Comment