Cramer says decline in commodity pricing could send some stocks higher

CNBC’s Jim Cramer on Wednesday told investors that declining prices of commodities doesn’t mean a recession is on the way. He suggested that instead these declines represent a return to normalcy after a long period of elevated inflation, which could lead to gains for consumer discretionary stocks like Amazon.

“When commodities go down, it’s a powerful sign that inflation’s under control. When inflation’s under control, interest rates go down, as lenders are more willing to take less for their money and demand is most likely dropping anyway,” Cramer said. “When rates go down, you’re more likely to buy things on Amazon, as individuals have more disposable income.”

One of the most closely watched commodities — crude oil — had a brutal day Wednesday. U.S. benchmark West Texas Intermediate crude tumbled 4% on Wednesday, settling below $70 a barrel at its lowest levels since June.

According to Cramer, Amazon will save on the cost of deliveries as gas prices come down. He added that Amazon’s popular membership program — especially for its grocery business — helps the company turn a profit even if commodity costs are low.

Cramer also said home builders are poised to benefit from lower commodity costs. Toll Brothers reported a better-than-expected quarter on Tuesday even as mortgage rates remain high. As rates come down, purchasing a home will be more affordable, and buyers will have more disposable income, Cramer noted.

“I just see the commodity decline as part of a return to normalcy,” Cramer said. “While many people in this country got raises during Covid, prices for most things went up more than wages did, and the core of those price increases came down to higher costs for all sorts of basic materials — the commodities. See, you get those down, we have hope of actual deflation.”

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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Amazon.