In order to understand the present inflation debate, traders ought to take an in depth look at corporate earnings reviews, CNBC’s Jim Cramer stated Tuesday.
“We’ve got a serious supply chain snag that’s pushing up prices all over the place,” Cramer stated. “But if the free market can correct itself … then I think productivity increases will be able to trump price increases, which will allow the Federal Reserve to keep holding interest rates low and allow stocks to go higher.”
Some market members count on greater costs to proceed in a state of hyperinflation, whereas different contrarians like Ark Invest’s Cathie Wood imagine costs will fall.
“I want to wrestle with the inflation versus deflation debate by looking at what’s happening with individual companies and their stocks,” the “Mad Money” host stated.
Cramer pointed to 3M’s quarterly outcomes. The manufacturing conglomerate on Tuesday beat Wall Street earnings expectations soundly, however 3M shares closed the session little modified. The firm stated excessive uncooked materials prices are pressuring revenue.
“Today, some huge companies reported and they made me feel less confident in Cathie Wood’s vision of a deflationary future, because so many of them told us that rising raw costs are putting pressure on their ability to make money,” Cramer stated.
Meanwhile, United Parcel Service earnings “told a story of deflation,” in accordance to the host. UPS beat on high and backside traces and the inventory rallied about 7%.
“United Parcel’s gains came down to higher productivity, which helps keep costs lower,” Cramer stated.
The “Mad Money” host stated there’s nonetheless extra to be taught from firms earlier than market members can understand the inflationary atmosphere.
“Going forward, we need more stories like UPS and fewer stories sounding like 3M. By the end of this brutal week, I bet you we’ll know the score,” Cramer stated.