Position your portfolio for a Fed win and avoid these three market mindsets, Jim Cramer says

CNBC’s Jim Cramer told investors on Thursday that there are four camps of thinking in the current market but only one worth listening to: the one that stays in the market and bets on the Federal Reserve winning its battle against inflation.

“I wouldn’t cash out. Stay the course, muddle through and eventually work the way through the events that caused inflation — Russia, China, the supply chain mess,” the “Mad Money” host said, referring to the Russia-Ukraine war and Covid factory shutdowns in China.

“Once that happens … you’ll want to have some stock exposure, because when the market turns, it tends to turn on a dime,” he added.

Cramer said that while his mindset is shared by one cohort of investors, there are three more camps of thinking that investors should ignore.

Here are the four camps of market mindsets as explained by Cramer, starting with the one he is a part of and believes other investors should be, too.

This group, which Cramer is a member of, believes “there’s been tremendous destruction in the stock market already … the likes of which we’ve rarely seen,” he said. “And we’re probably still not done with the pain, but after being way too timid, the Fed has indeed woken up.”

He added that this camp believes the Fed will win as long as Fed Chair Jerome Powell continues to act aggressively against inflation.

Cramer says that it’s not a good idea for the average person to take market advice from this cohort of pessimistic billionaires, who have much more cash to spare than the average person. 

“Some of these guys are very smart, and they sound very convincing, but their analysis only applies if you’re already super rich. If you’re a regular person, you’re going to have a different set of financial priorities,” he said.

This cohort believes the Federal Reserve is too late in raising interest rates and that there needs to be a recession for inflation to cool down, or that a recession is inevitable, according to Cramer.

“The maximum pain camp, they refuse to recognize that both the consumer and the enterprise are the healthiest they’ve ever been. …  They’re too binary in their thinking: They can only imagine rampant inflation or a miserable recession, but those are just the most extreme outcomes,” he said.

This group believes the economy will undergo stagflation, which is when inflation remains high while the economy slows down, says Cramer.

“They act like the economy can’t accelerate and inflation’s already totally embedded in the system. … Of course, you either believe Powell or you don’t. I think most don’t, which is why I’m betting the stagflation camp will be the dominant one,” he said.

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