Jim Cramer warns investors not to bet prematurely on a soft landing

CNBC’s Jim Cramer on Tuesday warned investors not to assume that the Federal Reserve will engineer a soft landing for the economy.

“Fair-weather bulls, who all believed we were headed for a severe recession two months ago … are now rushing to declare a soft landing way too soon,” the “Mad Money” host said. “Listen, I believe in the possibility of a soft landing, but the Fed still has a lot of work to do.”

Stocks have recovered slowly in the second half of the year after soaring inflation, the Fed’s interest rate hikes and Russia’s invasion of Ukraine roiled markets in the first six months.

Cramer has credited oil prices with helping spur the market to its bottom in June. More recently, softer-than-expected consumer price index and producer price index readings for July signaled that inflation might be peaking, helping to further boost stocks.

The turning point in the market has led some investors to believe that the Fed will be able to tamp down inflation without triggering a recession or, at most, create a mild one.

However, Cramer warned that these previously bearish investors who chose to flee the market at its worst should be careful about betting on a soft landing now that stocks are rallying — especially considering that employment rates are still strong.

He added that markets tend to lose money once investors start chasing rallies, underlining a need for caution.

“The bandwagon’s usually perilous for a bit when you jump on a month late, once so many medium- and small-sized companies have already turned up,” he said.