Jim Cramer says market pain is needed to prevent endless price hikes

CNBC’s Jim Cramer on Thursday reminded investors that pain in the stock market is unfortunately necessary for the Federal Reserve to win against inflation.

“Nobody wants to root for layoffs or lower stock prices. But the alternative is persistently high inflation — endless price increases for everything — and nobody wants that either,” he said.

Stocks fell on Thursday after fresh data indicated that the labor market remains strong, despite the Fed’s aggressive interest rate hikes to tamp down rising prices. 

Cramer explained that while the Fed needs to make it so that companies can no longer raise prices for goods and services, it’s inevitable that such an outcome will hurt portfolios.

“Lower home prices – it’s good if you’re looking for a house, but it’s awful if you own shares in homebuilder Lennar,” he said as an example. “In other words, there’s no free lunch for you, the investor.”

And while it’s unclear when the central bank will be able to roll back its interest rate increases and stop hurting the market, he said that the release of the nonfarm payrolls report on Friday will shed more light on the state of inflation.

“If it doesn’t show higher unemployment with no wage growth, the Fed will need to keep aggressively raising interest rates,” Cramer said.