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According to CNBC’s Jim Cramer, money managers began buying tech stocks as a hedge against inflation and Fed rate hikes. Last month, rising raw material costs resulted in a 5.4 percent increase in inflation, the largest increase in consumer prices in more than a decade. As a result, some investors are concerned that the Federal Reserve will raise interest rates sooner than expected to combat inflation, according to Cramer. After the market closed, the “Mad Money” host said, “If you want one industry that’s immune to both inflation and a Fed-induced slowdown, well, it’s big-cap tech.” “During a downturn, hyper-growth tech equities are actually what works best.” Despite the inflation figure, the market reacted slowly because Wall Street expected a rise in the consumer price index, according to Cramer. The major US averages all fell from record highs the day before, with the Dow Jones Industrial Average dropping more than 100 points. The start of earnings season is also on the minds of investors. Many businesses can’t afford to pass on their greater prices to customers because they’ll revolt. On the other hand, not everyone can handle a sharp increase in interest rates, as many money managers predict. That, according to Cramer, is quite implausible. “I don’t think [Fed Chair Jerome] Powell is going to change his mind,” he said, adding that “a lot of money managers disagree.” “They sell a lot of other things and buy tech when they see a [inflation] number like this.” It explains a surge in trading in big tech names like Alphabet, the parent company of Google, and Microsoft, the software behemoth. Their businesses aren’t adjusted to inflationary changes, such as increases in gas, plastics, packaging, and other costs, according to Cramer. Alphabet’s stock rose 0.29 percent to $2,546.83 at the closing, while Microsoft’s stock rose 1.3 percent to $280.98. Apple, which produces a variety of devices, may be harmed by increasing material costs. However, the brand sells, and those expenditures can be paid by customers, according to Cramer. Tuesday, Apple’s stock rose 0.8 percent to $145.64. In the consumer packaged goods sector, a stock like PepsiCo, according to Cramer, is an outlier. While the company would face greater input costs, such as packing and shipping, he believes it will be able to pass these expenses on to consumers in the form of higher prices for drinks, chips, and other products. Pepsi’s stock rose 2.3 percent to $152.96 after the firm reported solid results and improved its outlook. Cramer’s charitable trust owns Microsoft, Apple, and Alphabet, among other companies. Disclaimer Do you have any questions for Cramer? Cramer may be reached at 1-800-743-CNBC. Interested in learning more about Cramer’s world? Make contact with him! Money that’s out of control Jim Cramer on Twitter Twitter, Facebook, and Instagram are three of the most popular social media platforms. If you have any questions, comments, or recommendations for the “Mad Money” website, please send them to madcap@cnbc.com./nRead More

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