After a sour day in Washington and Wall Street, CNBC’s Jim Cramer warned investors that lawmakers will inevitably cost them money as debt ceiling negotiations drag on.
“Prepare for our politicians to lose you even more money,” Cramer said, referring to the earlier standoff surrounding the debt ceiling in 2011. “They hurt you then. They didn’t haven’t finished hurting you now. very hard to get out and back in early enough for it to make a difference, which means most of us have to bear the pain.”
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Market watchers are also weighing news of the emergence of a new variant of Covid-19 in China, he said. It is unclear whether this new wave will prompt Beijing to impose new travel restrictions, many of which eased several months ago.
“We don’t know if travel will be banned or restricted, although Macau Casino shares are trading as if it will happen,” Cramer said. “And we don’t know if the psyche of the recently exuberant Chinese consumer will be impacted.”
With the turbulent negotiations over the 2011 debt ceiling ringing in his ears, Cramer is pessimistic about lawmakers’ ability to reach a deal before chaos reigns.
“Even though we finally got an agreement [in 2011] and avoided the worst-case scenario, the standoff was enough for Standard & Poor’s to downgrade our government’s credit rating,” he said.
Cramer considered the merits of selling stocks ahead of the potential market slump, but worried that many would not be able to buy them back fast enough to see real gains.
“I would hate to advise you to sell and then buy back later, because we don’t know if you’ll be able to come back before the green light,” Cramer remarked. “Having said that, if you think our leaders really want to get a deal, then maybe it’s worth trying to avoid the decline ahead – and if we follow the 2011 script, there would be a decline in ‘about 12% from here to the bottom.’