Jim Cramer Predicts Market Slowdown, Says 'We Got Too Hopeful' And That Realty Has Now Set In: 'Big Gains May Be Behind Us For A Bit'

Jim Cramer has suggested that the recent market surge may be coming to a pause. He attributed the market’s pullback on Thursday to overbuying and a shift from optimism to reality.

What Happened: Cramer, the host of CNBC’s “Mad Money,” mentioned that the market may need time to recharge before another rally.

"The market's still too overbought, and we got too hopeful and now reality, with its positives that get rewarded, still, and its negatives that are punished, has set in," Cramer said. "So the time for big gains may be behind us for a bit as we recharge and shed our Panglossian rose-colored glasses."

Investors are looking ahead to the Federal Reserve Chair Jerome Powell‘s speech at the central bank’s annual conference in Jackson Hole on Friday. Cramer suggested that the market’s reaction to Powell’s speech could be exaggerated due to the possibility of a September rate cut and the anticipation of a Democratic sweep in November.

He also highlighted the market’s current trend of punishing weaker companies and rewarding stronger ones, even after good earnings reports.

He mentioned that stocks of companies like Snowflake Inc. SNOW, Williams-Sonoma, Inc. WSM, and BJ’s Wholesale Club Holdings Inc. BJ have suffered despite decent earnings reports.

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Why It Matters: Recent comments from Federal Reserve officials have signaled a potential shift towards lowering interest rates. Boston Fed President Susan Collins and Philadelphia Fed President Patrick Harker indicated that the central bank might begin easing rates as soon as September.

This comes as inflation has receded and the labor market has cooled without raising significant concerns. Collins mentioned that with inflation on track to meet the Fed's 2% target, it may be time to adjust the benchmark federal funds rate, currently at a 23-year high of 5.25% to 5.5%.

Moreover, the Nasdaq 100 experienced a significant decline of 1.6% on Thursday as traders turned cautious ahead of Powell’s Jackson Hole address on Friday at 10:00 a.m. ET.

This downturn was driven by a shift towards risk aversion, with market participants eagerly seeking insights about the future path of interest rates and the broader economic landscape. The session saw a noticeable downturn in sentiment after stronger-than-expected growth in private sector activity for August was reported.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote