In this piece, we will look at Jim Cramer’s bold predictions about these financial stocks.
Before and after the Federal Reserve’s interest rate cut earlier this month, Jim Cramer had plenty to say on the subject matter. Ahead of the Fed’s announcement, the CNBC host wondered why investors were reading too much into the Fed’s interest rate cut decisions. In an episode of Squawk on the Street, Cramer stated that it wasn’t clear to him why “people want to be very concerned about the future after the cut, I really am not buying any of this.” Another pressing issue that’s caught his attention is the incoming Trump Administration’s proposed tariffs against China and other US trading partners.
He linked tariffs with interest rate cuts and the consumer price index (CPI) or inflation. One of the biggest concerns among analysts and economists, when it comes to tariffs, is the extent to which they might influence prices. Cramer believes that the Fed might not cut interest rates if the tariffs cause prices to rise. On the flip side, he added that if there aren’t any tariffs or if the incoming administration is selective about them, then the housing market might pick up again and auto sales could rise.
Additionally, Cramer also speculated that even if the tariffs did cause inflation, “a year we’ll be sitting here and saying well, okay we had this blip up inflation but that’s over.” As a result, he believes that investors should focus more on the Trump administration’s policies instead of the Fed. “Why do we have to focus so much on what’s going to happen next year for the Fed when they actually have to react to what the President does?” he asked.
The need to focus on the Fed did become clear soon after Cramer’s comments. In a highly watched mid-December decision, Fed Chairman Jerome Powell announced that while his organization was cutting interest rates by 25 basis points, it might cut rates just twice in 2025 as opposed to the earlier guidance of four cuts. On the day Chair Powell updated investors about the bank’s outlook, the flagship S&P, the Dow, and the broader NASDAQ stock indexes lost 2.95%, 2.58%, and 3.56%, respectively.
Cramer, unsurprisingly, wasn’t short on words when it came to dissecting the Fed’s decision. Speaking on Mad Money on the day of the rate cut, he shared that Powell was caught off guard by having to fulfill market expectations of an interest rate cut that might not be justified given the strength of the US economy. According to Cramer, when it came to the rate cut the “data didn’t back it up. It would have been much better off if they had explicitly taken a wait-and-see approach before this meeting. This time they telegraphed the wrong thing. Hence today’s meltdown.”
The next day, he shared that it would have been better if the Fed hadn’t “set us up, not told certain people in the media, whatever, that we need a cut.” Yet, even though Cramer believes that America’s economic strength did not warrant an interest rate cut, he isn’t convinced that the economy is strong all over. On Squawk on the Street ahead of the interest rate cut, Cramer wondered where the Atlanta Fed had gotten its 3.2% US GDP growth estimate for Q4.
“I don’t know where these people get that things are strong, they look at the aggregate numbers, I look at the individual companies, I am trying to find companies that are strong,” he outlined and added that he’s “trying to find why. I’m trying to find where” the GDP is growing by 3.2%. Cramer speculated “travel’s very strong yeah. Leisure’s very strong. Dining out’s very strong. These are strong and by the way, they’re very obvious, they look obvious to the Atlanta Fed. I don’t know what kind of weighting they have but wow.”
Cramer’s comments about the economy and the Fed’s future actions are particularly important when we talk about financial services stocks. These firms typically do well when consumer spending isn’t constrained by inflation and interest rates are low to facilitate business lending, deal-making, and other activities. For a detailed look at how Trump’s win could affect the banking sector, you should check out 10 Best Bank Stocks To Invest In For the Long Term.
Our Methodology
To compile our list of Jim Cramer’s bold predictions about financial stocks, we scanned the stocks he mentioned in Mad Money and Squawk on the Street as far back as in August. Then, we picked out financial stocks and ranked them by the number of hedge funds that had bought the shares in Q3 2024.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds invest in? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. Joint Stock Company Kaspi.kz (NASDAQ:KSPI)
Number of Hedge Fund Holders In Q3 2024: 26
Date of Cramer’s Comments: 10-04-24/10-07-24
Performance Since Then: -8.39%
Joint Stock Company Kaspi.kz (NASDAQ:KSPI) is a Kazakh software company that operates a super application. Its software enables users to make payments, buy and sell products, and access financial services such as BNPL and savings. More than 95% of the firm’s revenue comes through transaction fees and interest, and Joint Stock Company Kaspi.kz (NASDAQ:KSPI) also operates the third largest bank in Kazakhstan. A key limiting factor for the firm is its primary market of Kazakhstan, and on this front, Joint Stock Company Kaspi.kz (NASDAQ:KSPI) is acquiring a Turkish company to expand its global presence. The company currently serves more than 14 million monthly active users and is the largest of its kind in Kazakhstan. In October, Cramer shared that he preferred PayPal over Joint Stock Company Kaspi.kz (NASDAQ:KSPI), and the shares are down by 8% since then:
“This is fintech. It’s a good company. I prefer, right now, I’ve been watching PayPal. I think it’s a similar business, and I think a better value.”
9. BlackRock Inc (NYSE:BLK)
Number of Hedge Fund Holders In Q3 2024: 37
Date of Cramer’s Comments: 10-04-24
Performance Since Then: 10%
BlackRock Inc (NYSE:BLK) is one of the largest and most diversified asset management companies in the world. The firm manages mutual funds and investment portfolios, and it is also a key player in the private equity market. Strong stock market performance in 2024 coupled with BlackRock Inc (NYSE:BLK)’s bitcoin exchange-traded funds that became operational at the start of the year have helped the firm as its shares are up by 30.5% year-to-date while its assets under management have boomed to $10.7 trillion as of the second quarter and $11.5 trillion as of the third quarter. Since Cramer’s remarks in October, the stock hasn’t stopped rising, and the only major dip took place in December when the shares lost 3% in the days following the Federal Reserve’s updated interest rate outlook. Here’s what Cramer said:
“Larry Fink’s done an incredible job, not only in making money but also in producing the best asset management software. I don’t think this company gets nearly enough credit for either and its stock deserves to trade higher. I think you could break out here.”
8. Citizens Financial Group, Inc. (NYSE:CFG)
Number of Hedge Fund Holders In Q3 2024: 46
Date of Cramer’s Comments: 10-07-24 to 10-10-24
Performance Since Then: 5.95%
Citizens Financial Group, Inc. (NYSE:CFG) is a regional bank with a presence in the consumer, private, and commercial banking markets. As is with most banks, the current interest rate regime has seen Citizens Financial Group, Inc. (NYSE:CFG) struggle to balance its interest income with interest expenses. While higher rates typically allow banks to charge more money from borrowers, they are accompanied by lower loan demand and higher payouts to depositors. Subsequently, for the first nine months of 2024, Citizens Financial Group, Inc. (NYSE:CFG)’s net interest income dropped by 11.2% to $4.2 billion. Since Cramer’s remarks in October, the stock has seen a lot of magic. It soared by a whopping 14.4% in November after the election as investors bet on lower regulations but closed 4.7% lower on the day of the Fed’s remarks due to higher costs stemming from higher rates. Here’s what Cramer said:
“It’s a Northeast bank, it’s called Citizens Financial Group. I haven’t focused on it since it was spun off by the Royal Bank of Scotland a decade ago. When you take a closer look at Citizens, it’s got some of the best capital ratios of large regional banks. That matters for a couple of reasons. First, it offers safety. This is how you know Citizens won’t be the next First Republic if we have another banking blow-up. But more importantly, in calmer times, it gives them [the] flexibility to do other shareholder-friendly things, dividends [and] buybacks. In fact, in late July, after hearing all the regional banks report second-quarter earnings, analysts at Deutsche Bank called Citizens Financial their top pick in the sector, citing strong earnings growth potential as net interest margins normalize, growth initiatives pay off like the private bank build-out and their expansion in New York City and mortgage demand bounced back thanks to lower rates. Deutsche Bank analysts also know that Citizen has been held back in recent quarters by some significant one-off items. But management is signaling that there shouldn’t be much more of an impact from that kind of thing going forward. That all sounds real good to me. So count me in as a believer in Citizens Financial.”
7. Blackstone Inc. (NYSE:BX)
Number of Hedge Fund Holders In Q3 2024: 50
Date of Cramer’s Comments: 09-06-24
Performance Since Then: 26.90%
Blackstone Inc. (NYSE:BX) is a global asset management giant with $43 billion in assets and $1.1 trillion in assets under management as of the third quarter. Like other asset managers, Blackstone Inc. (NYSE:BX) benefits from lower rates as they increase merger and deal-making activities and also increase liquidity in markets. The tailwinds from a lower interest rate regime are also evident in the firm’s stock which is up 35.7% year-to-date. Specifically, Blackstone Inc. (NYSE:BX)’s shares soared by 7.9% in October after the firm’s $1.01 billion in earnings per share beat analyst estimates of $0.92. The beat came on the back of heightened capital markets activity, and it followed Cramer’s mixed optimism during the previous month:
“Near term, I don’t have a lot of conviction. Blackstone has had a very big run, from the 120s to the 130s. Longer term, I think Jonathan Gray and his team are simply brilliant, and their actions this week in the data center are very strong. I like it.”
6. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders In Q3 2024: 62
Date of Cramer’s Comments: 10-07-24/10-08-24
Performance Since Then: 9.96%
American Express Company (NYSE:AXP) is a financial products and services company known primarily for its payment cards. These cards are also the firm’s bread and butter since its largest revenue line item is the money earned through card discounts that its customers can avail. During the first nine months of the year, American Express Company (NYSE:AXP) earned $26 billion through discount revenue which accounted for 53% of its overall revenue. Therefore, the firm is heavily reliant on consumer spending and merchant health for its financial stability and stock performance. Since Cramer’s remarks, American Express Company (NYSE:AXP)’s shares soared by 7% after the US election and dipped by 4.5% on the day of the Fed’s rate cut announcement. Here’s what Cramer said about the stock in October:
“.. JP Morgan downgrades the stock from buy to hold. America’s best, they say, ‘represents the asymmetric risk associated with a stock trading near the high end of its valuation range with limited upside to estimates.’ So they say, go elsewhere.
“Do you know how many times Amex has been downgraded and gotten right off the canvas a few days later? Do you know how many times it’s bounced back almost immediately? This is the premium global credit card company in the world, and you’re downgrading ahead of a rate-cutting cycle. How about some history, for heaven’s sake?
“I say if you sell it at $276, I hope you can get back in, I don’t know, at $264. If it reports a so so quarter, maybe you can do that. You might leave it, but you may never get back in. And therefore you might miss a much bigger bevy of points, which is what I’m worried about.”
5. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders In Q3 2024: 72
Date of Cramer’s Comments: 9-18-24
Performance Since Then: 31%
Wells Fargo & Company (NYSE:WFC) is one of the biggest consumer banks in America. Like other banks, it thrives when the demand for loan products is high and it can keep costs low through manageable interest rates. Additionally, due to its scale, Wells Fargo & Company (NYSE:WFC) also depends on a relaxed regulatory environment that does not raise costs in the form of higher buffer requirements and stress testing. The bank also depends on low interest rates, as has been evident through its net interest income this year. For the first nine months of 2024, Wells Fargo & Company (NYSE:WFC)’s net interest income dropped by 9.6% on the back of a 45% jump in interest expense. Since Cramer’s remarks, the stock first jumped by 5.6% in October after Q3 $1.52 EPS beat analyst estimates of $1.28. It added another 13% in November after the election. Here is what Cramer said:
“Well, Wells Fargo is a winner, though. Okay, let me tell you, I hear you and I feel exactly what you’re feeling, but I am a believer in Charlie Scharf. He happens to be a head coach who knows exactly what to do with two minutes and one minute left. He would never be fooled by what you saw on the field that Monday night. I think Wells comes through this fine; it’s up 10%, and I think it’s going to go higher. It can go back to 61-62. Let’s hold on to it. Thank you for being a member of the club!”
4. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders In Q3 2024: 98
Date of Cramer’s Comments: 9-12-24
Performance Since Then: 14.34%
Bank of America Corporation (NYSE:BAC) is another mega-American bank. Its reliance on consumer banking has made the current high-interest-rate era one of the toughest. To understand how high rates affect it, consider Bank of America Corporation (NYSE:BAC)’s revenue for the nine months ending in September. During this period, 55% of its revenue came through net interest income which means that if rates stay higher for longer, then Bank of America Corporation (NYSE:BAC) might struggle to generate sufficient interest income due to slow loan demand but bear high deposit costs. However, its presence in investment banking and other markets diversifies the income statement and creates avenues for growth from capital markets. Since Cramer’s remarks, the only major share price driver was the election which saw Bank of America Corporation (NYSE:BAC)’s shares surge by 17%. Here’s what Cramer said:
“Okay, Warren, got this. I think Bank of America Corporation (NYSE:BAC) snaps back the moment we see that he’s sold so much that he can’t hurt it anymore. It holds up rather well, considering it sells at 11 times earnings. That’s the one we want to be in, and I like it.”
3. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders In Q3 2024: 105
Date of Cramer’s Comments: 9-10-24
Performance Since Then: 17.32%
JPMorgan Chase & Co. (NYSE:JPM) is a global banking giant with total assets worth a whopping $4.1 trillion. It also has one of the most diversified revenue streams among its peers. JPMorgan Chase & Co. (NYSE:JPM) earns 48% of its revenue through non-interest income, and within this dollar amount, 30% comes from asset management and investment banking. As a result, even if lower rates hurt JPMorgan Chase & Co. (NYSE:JPM)’s interest income, it can make up for the drop by benefiting from growth in capital markets. Investment banking led to a 4.4% share price jump in October when fees from the division grew by 31% during the third quarter. JPMorgan Chase & Co. (NYSE:JPM)’s shares also jumped by 11.5% after the November election. Here is what Cramer said in September:
“Today, Daniel Pinto, JPMorgan Chase & Co.’s President and Chief Operating Officer, lowered the boom on the optimists who desperately wanted to buy something other than tech. The big bank told us that things are less bullish than we thought. There isn’t as much capital markets activity as we’d hoped this quarter, and most importantly, the estimates for next year are too high because of a likely miss on net interest income.
“The key metric for banks, one that analysts expect to be good when rates are coming down, is net interest income. In short, JPMorgan Chase & Co. is going to miss the numbers next year. If the “beacon of finance” can’t make the estimates, how the heck will anyone else? So, the stock comes down 5%, at one point even uglier, and the rest of the banks roll over.
“It gets worse. Last year, Pinto said the company was slated to spend between $1 billion and $2 billion on tech. This year, JPMorgan Chase & Co. is spending $2 billion, but a lot of that is related to cracking down on fraud. Great, that’s a deadweight loss for the bank—a must-spend with no real return on investment. There’s an opportunity for AI to help them cut costs, especially among the 100,000 to 250,000 people in call centers or doing other back-office jobs, what he calls “operational” roles. Now, many of these people will be “impacted”—which, I guess, is code for laid off. The rest will be part of what he calls “operational efficiencies,” meaning getting more productivity from the same people.
“The good news here is that at least JPMorgan Chase & Co. will have some lower expenses over the next three to five years. Given that everything else is going the wrong way, maybe someday, at some point, there will actually be a return on investment in AI. But you can’t just say that out loud because it would require admitting that a lot of “deadwood” is about to get chopped—and deadwood, of course, means people. Wall Street used to actually say stuff like that, but these days we come up with cleaner, more indirect euphemisms. “Hey, we don’t do layoffs anymore, we find efficiencies, we right-size the workforce.”
2. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders In Q3 2024: 120
Date of Cramer’s Comments: 09-05-24
Performance Since Then: 1.81%
Berkshire Hathaway Inc. (NYSE:BRK-B) is Warren Buffett’s investment holding company with stakes in a variety of businesses. The firm’s largest business is its insurance division closely followed by its utility and energy operations. Despite the well-diversified business model with stakes in railroad, construction, and energy, Berkshire Hathaway Inc. (NYSE:BRK-B) nevertheless depends on robust economic performance for its share price gains. Therefore, it was unsurprising that the stock fell by 2% after the Fed’s interest rate decisions and soared by 5.4% after the November election. Here’s what Cramer said in September:
“When is it a bad time to buy Berkshire? Buy some tomorrow. I think it’s terrific. Then, wait until it comes down and buy some more.”
1. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders In Q3 2024: 165
Date of Cramer’s Comments: 10-07-24/10-08-24
Performance Since Then: 14.8%
Visa Inc. (NYSE:V) is the largest credit card processor in the US as it commands 61% of the US market by purchase volume. As a result, the stock is dependent on consumer spending strength and low rates to drive higher transaction volumes. Higher spending led Visa Inc. (NYSE:V) to beat analyst revenue estimates of $9.49 billion in Q3 by posting $9.62 billion. Its shares soared by 2.9% after the earnings and then gained another 4.8% after President-elect Trump’s victory in the November election. Over the long term, Visa Inc. (NYSE:V) might have to pick up the pace with its global expansion efforts to counter the threat of fintech upstarts eating away its market share. The firm is also being sued by the Justice Department for alleged monopolistic practices and is on the backfoot when it comes to a $30 billion settlement with merchants. Here’s what Cramer said in October:
“… Look, it sells at 27 times earnings. I’m waiting for Visa to come down at a discount. You don’t have that. Right now, I have to tell you, Mastercard is actually doing a little better than Visa. But no, no need to add a position on that. That’s not the right basis. Just keep looking. It’s a great long-term stock and I think it always will be as long as this is well run as it is now.”
V was a financial stock Cramer was waiting to come down in October. While we acknowledge the potential of V as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than V but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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