Thanks to the Federal Reserve, the collapse of Silicon Valley Bank has ended up breaking positive for the stock market, CNBC’s Jim Cramer said Wednesday.
Regulators shuttered SVB earlier this month after depositors pulled out billions, practically overnight. Cramer said the Fed had been focused on fighting the “war against inflation,” but quickly had to turn its attention to the “instant financial crisis” caused by SVB.
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“When you go through all the ramifications of the SVB failure, they actually end up breaking positive, not negative, for the stock market — all because of the Federal Reserve,” Cramer said.
As a result, he said investors have turned to the Wall Street playbook on what to buy when there’s an economic slowdown without inflation: tech stocks.
“The bottom line? This market may be mindless, but it’s got muscle memory that says you reach for tech in a slowdown,” Cramer said. “The Silicon Valley Bank fiasco was just the oxygen the tech bull needed to snap out of its funk and get back to work.”
Cramer pointed to Apple, Meta and Nvidia as examples of companies that are “brimming with cash” and don’t need to tap into the equity or bond markets. He said people also tend to turn to stocks like Caterpillar or Illinois Tool Works because investors assume they will experience a slowdown in orders.
“The great thing about trying to figure out which stocks to buy in this new scenario is that they’re already chosen for you,” Cramer said.
