After a rollercoaster day where the averages initially got hammered before rebounding, “Mad Money” host Jim Cramer explains terms like reflation, inflation and risk-off and their affect on stocks. Subscribe to CNBC PRO for access to investor and analyst insights:
CNBC’s Jim Cramer advised that market players have two ways to approach high-flying growth stocks that teetered and tottered their way through a volatile session on Wall Street Tuesday.
Investors can choose to join in on the sell-off that has dropped some tech names like Apple into negative trading territory this year.
The other choice — taking a cue from Federal Reserve Chair Jerome Powell’s restated commitment to leave interest rates at low levels — is to hold on for the ride and consider loading up on worthy stocks discounted from their highs, Cramer said after the market closed mixed.
“After today’s late afternoon rebound, it’s not too late to sell the more egregiously expensive stocks if you want to,” the “Mad Money” host said. “But as for the better growth stocks, down more than 10% from their highs, call me a buyer. Not all at once, not big, but a buyer nonetheless in any retest of that 9:47 a.m. low that we saw today.”
Cramer’s assessment of the current state of the market follows a roller-coaster trading day where major U.S. averages bounced from their session lows. The market suffered a steep sell-off in the morning, with the Nasdaq Composite down almost 4% at its trough, before the blue-chip Dow Jones and benchmark S&P 500 managed to etch out modest gains at the close.
The Dow advanced more than 15 points to 31,537.35 for a 0.05% gain. The S&P 500 finished 0.13% higher at 3,881.37 to end its losing streak at five. The tech-heavy Nasdaq could not muster enough for a positive day, falling 0.5% to 13,465.20, extending Monday’s losses.
“I’m happy to entertain the idea that you need to ring the register here, but I happen to like growth stocks in a reflation scare. I like growth stocks when risk is on. I like growth stocks when risk is off,” Cramer said.
“If you want to hold on to the growth stocks … you have to be prepared to take some pain, just like in late 2015 and early 2016 — that was the last great moment to buy these stocks — or you can just do some selling if you want to and try to swap back in at a lower level,” he added.
The market has toiled through a rotation as investors swap growth and tech stocks that outperformed throughout the pandemic for value plays of companies that are expected to see business return as the economy reopens. The Nasdaq is now 4.5% off its closing high earlier this month.
Worries that an inflation revival could trigger the Fed to raise interest rates, as it did in twice in a three-month span between 2015 and 2016, shook investors out of growth stocks in recent days, Cramer said. Higher rates pose a challenge to growth and utilities stocks.
Share prices in Apple, Salesforce, and ServiceNow are all down at least 3% this week.
During an appearance before Congress Tuesday, however, Powell told lawmakers that inflation remains “soft,” the labor market faces ongoing challenges and that the central bank was committed to its current monetary policy.
That reassured investors about interest rates, helping the market recover some losses.
“This time our Fed chief has vowed to hold off on raising rates — too many unemployed — but there will come a time and a point where these growth stocks will be somewhat hopeless,” Cramer said. “They’ll kind of look like they did today … before people came in to buy.”
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First off you have stocks for over evaluated in other words over evaluation means from the past bull market the stocks have risen to extremely high points where now at about 25% overvalued now when they reach a secular bear market coming out of the end of a bullish secular market you are now hitting about a 15%,flationary headwind at this point
To control inflation, since the consumer is 2/3rds of the economy, how about "ASKING THE CONSUMER" to slow down their spending. What's wrong with Mr. Biden going on the air and appealing to Americans to reduce their spending (within reason of course, continue essentials, not going overboard). Obviously there are other factors for inflation such as supply chain issues, but reducing consumer demand would have an immediate effect. Of course, businesses in general might be hurt in the short run, and some Fed officials may doubt the reliability of consumer. And going directly to the consumer flattens the bureaucratic hierarchy and bypasses the chain of command getting a faster response time. Moreover, Americans at their core, are good-natured people and history has shown (WWI and WWII) that we will rise up and help if we understand the importance of the economic imperative, the need to slow down our buying spree, and to act now!! Encourage Americans to "save more and spend less". As a nation, we need guidance, otherwise being a capitalist society selfish individuals will take advantage and act to their own interest.
Wow, this is maybe the Person I have seen in years. And I live on the internet!
Nice video, I was able to build a big income stream during the covid-19 pandemic investing with a professional broker, Mrs Magdalena Ferguson.
ARKK ETF—proxy for highest growth, disruptive stocks that cranked in 2020 was at 139 on the day of this Cramer episode. Its low was 99 approx 3 months later(by mid May) or ~30% decline. From its high of 157 to low 99——–a 37% decline in first 4 months of 2021 while overall stock markets rose double digits to record highs in same period. So inflation scare KILLED these stocks with many down 75 to 80%.
I am not one to blame Cramer or anyone as picking stock for public consumption is impossible. But I learned one absolutely must use technical charts as they told us twice to run for the hills—instead many kept buying more as they came down and lost gobs of $$ they will never get back.
I would say Cramer overall means well and adds TON of value but he tends to be a tad over-optimistic—-a useful tool as stock "markets" rise since beginning of time in the long run 😉 but 3 of 4 stocks actually don't—-only 1 of 4 are positive over long term so either use index funds or be a really good stock picker 😉 GLTA & thx Cramer
Wood is the new gold. Wait till TP prices goes up. That's when things will really hit the fan.
The sounds of the this video are super annoying.
Leet on the boomer's bull bear board
So it's totally cool for Cramer to pump stocks on television but when WSB does it somehow it's different and we need lEgIsLaTiOn
Cramer is a absolutely a liar…
Inflation is not good….
Pretty much better, am earning now. Never knew it could be this profitable
Is that Louis C.K.
The knotty curtain outstandingly hammer because brother-in-law ultrasonically mug alongside a determined anthropology. real, tight pendulum
I wanna hate on Jim, however he is spot on with everything he says in this segment. Inflation is the Fed's friend though.
Cramer is a clown.
This guy is the biggest hypocrite out there
Man did I choose the right time last weekend to sell my Bitcoin and move it to stocks. Now to buy the dip.
Joe Biden is cancer and stole the election. Rise up and put democrats in prison
coked cramer
"Apple wont raise their prices because they like their customers" has got to be the funniest thing I've ever heard. No reason to raise your price when you are already extremely overpriced, use sweatshops in india to assemble your products and have enough dumb people that will buy the same exact phone labeled with a different number every year
Good 1. I even felt a little Joe Pesci come for a second
Apple can't raise the price, since there isn't a moving economy, everything around you is sitting on pause and the Fed is looking to mute the interest until people get back to work, but unfortunately, the vaccine roll out is slow and the variants are multiplying but not in high numbers, Apple will keep the price of the iPhone where it is and give you a cheaper option.
Think about it bro.
Cramer is going to predict the crash of the US Dollar well soon.
Why Am i not understanding a word of what he is saying?
oh wait because i just started investing last month.