CNBC’s Jim Cramer on Thursday warned that soaring shipping costs due to troubles in the Red Sea won’t help the U.S. tamp down inflation, telling investors they shouldn’t bank on a lot of rate cuts from the Federal Reserve.
“If the last few years have taught us anything, it’s that supply disruptions are the bane of the Fed’s fight against inflation,” he said. “And if ships in the Red Sea aren’t safe, that’s a major disruption, meaning you simply can’t expect as many rate cuts this year because the cost of freight’s suddenly gotten too expensive, and the cost of freight flows through to the cost of pretty much everything.”
In recent weeks, Yemen-based Houthis have attacked ships traveling through the Red Sea, one of the most important global shipping routes. As a result, many major shipping companies are sending their vessels on lengthy and expensive detours, causing freight prices to skyrocket.
Due to the Red Sea’s proximity to the Middle East’s energy production, Cramer said these shipping problems could also hike up the price of crude. With hotter-than-expected figures for December’s consumer price index and retail sales, Cramer argued inflation could already be on the rise.
Although these attacks hurt the broader economy, they could be a major boost for the shipping industry, which has spent the last year in a recession. But for investors, Cramer said the money has already been made in shipping stocks, and they’re also too volatile to be long-term investments. Instead, he advised looking toward tangential companies that may be more valuable now that overseas shipping is capricious.
“Right now, I don’t think you should be chasing the shipping stocks — it’s a bit late for that,” Cramer said. “I’d rather own some other transports, again, like FedEx or Canadian Pacific Kansas City.”
