Cramer has changed his posture to be more defensive ever since the Fed tightened. That is because he has learned over the years never to fight the Fed and never fight the tape. Cramer knows when the market is determined to go down that is when you are fighting the tape.
In all other downturns since the Great Recession, the Fed was on the side of investors and did not want to hurt a recovery. Friday’s sell-off was unique from those previous routs because the Fed has changed its position and decoded to tighten.
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Cramer had first-hand experience of trying to fight the Fed in 1998. That is when he haplessly bought a stock right into Fed tightening, and then had to get rid of it just to save his hedge fund.
In the middle of the selling, the Fed realized it was wrong and called an emergency meeting to stop the rate hikes because they feared the U.S. was going into a recession. The market has rallied like crazy ever since and has not looked back.
“That is not happening now. You are fighting the Fed big time and if the Fed isn’t careful, 2016 will mark a return to a recession,” Cramer said.
These fears of a recession are what Cramer attributed as the over-arching reason for the sell-off. And if the Fed continues its current course — that is exactly what will happen.