The equity market is beginning to see a “fits-and-starts” recovery amid hopes that the Federal Reserve may soon start to pivot or at least pause in light of a thaw down in inflationary pressure.
What Happened: CNBC’s “Mad Money” host Jim Cramer on Monday noted that a few cyclical stocks have “caught fire” recently, and these “cyclical smokestack” stocks could be worth owning.
Cyclical stocks are those whose prices vary depending on the macroeconomic conditions and business cycles. Given the earnings of cyclical companies are tied to the fortunes of the economy, conventional wisdom dictates that investors should stay away from them in a recessionary environment, Cramer said. However, this time around, the Fed’s rate hikes are impacting tech stocks and speculative assets such as cryptocurrencies, he added.
“That means it’s possible the central bank doesn’t need to raise rates enough for industrial stocks to also get crushed,” the stock picker said.
He also sees secular trends such as the travel boom and favorable legislation pushing these stocks higher.
“These are great companies that have positioned themselves in some terrific end markets and dominated their industries to the point where potential customers have no choice but to turn to them,” Cramer said.
Cramer’s Cyclical Stock Picks:
he CNBC host recommended buying the following cyclical stocks:
- Boeing Company BA
- Caterpillar, Inc. CAT
- Deere & Co. DE
- Dow, Inc. DOW
- Honeywell International, Inc. HON
- Nucor Corporation NUE
Boeing and Honeywell have exposure to aerospace and could be beneficiaries of the travel boom, Cramer said. He expects Caterpillar, Deere and Nucor to capitalize on the Biden administration’s infrastructure bill.
Price Action: The Vanguard Industrials Index Fund VIS ended Friday’s session down 0.69% at $185.88, according to Benzinga Pro data.
Read Next: Best Consumer Cyclical Stocks
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.