Inflation won’t come down any time soon if Tuesday’s rally lasts

CNBC’s Jim Cramer said Tuesday’s market gains needed to come down so the Federal Reserve can beat inflation as soon as possible.

“Right now the best outcome would be for the averages to drop quickly, so [Fed Chair Jay Powell] can end it,” he said.

“Powell better hope this race doesn’t last, if not these beach house prices, new construction, Lennar homes, processed food stocks and oil prices are not going down and staying low anytime soon,” he added, referring to the homebuilder’s warning in its latest earnings call that Buyers pushed back current house prices as sales slowed in some markets.

Shares rose on Tuesday after the market closed on Monday due to Juneteenth. While the rally was a welcome reprieve for investors from last week’s declines, many fear Tuesday’s comeback will be short-lived as recession fears loom on Wall Street.

Cramer said while he normally favors rising stock prices, the Fed needs the market to go down for inflation to come down as well. The reason, he said, is that a falling market will dampen spending and keep people in the job market.

“In recent years, abundant stock market gains have allowed winners to spend like crazy,” he said.

“If Powell can drive this market down and stay down, reversing a lot of those gains, then the wealthy are less likely to spend aggressively and a lot of people are more likely to stay in the workforce when they would have otherwise retired,” he added.

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