Jim Cramer talks next week's market game plan

Key Concepts:

• Federal Reserve independence and interest rates
• Impact of tariffs on inflation and the stock market
• Earnings season and snap judgments on Wall Street
• Bank stocks (Comerica, Zions Bancorp, Capital One, Discover Financial)
• Aerospace and defense stocks (GE Aerospace, Northrop Grumman, RTX, Lockheed Martin)
• Consumer staples (Kimberly-Clark, Procter & Gamble, PepsiCo, Colgate, AbbVie)
• Technology stocks (Tesla, AT&T, IBM, Lam Research, Alphabet/Google, T-Mobile)
• Airlines (Delta, United, Southwest, American)
• Restaurants (Chipotle)
• Enterprise software (ServiceNow)
• Gold stocks (Niko Eagle)
• China exposure and trade relations
• Stock valuation and modeling

1. Macroeconomic and Political Commentary:

• Federal Reserve and Interest Rates: Jim Cramer discusses President Trump's desire to oust Fed Chief Jay Powell for keeping interest rates "too high." He notes that while firing Powell is illegal due to the Fed's independence, the White House's desire for more control is evident.
• Tariffs and Inflation: Cramer highlights the potential for tariffs to cause higher prices and inflation, which would prevent the Federal Reserve from cutting rates. He acknowledges Powell's difficult position, caught between historical precedent and political pressure.
• Market Reaction: The Dow Jones Industrial Average sank 527 points, partially due to a shortfall from UnitedHealth. The S&P 500 advanced slightly (0.13%), while the Nasdaq declined (0.13%).

2. Earnings Season Game Plan:

• General Strategy: Cramer emphasizes the importance of earnings season and the need to make "snap judgments" based on company reports. He is canceling all outside engagements to focus on analyzing earnings.
• Bank Stocks:
  • Comerica and Zions Bancorp: Considered "suspect" but potentially attractive due to high yields, low tariff exposure, low charge-offs, decent loan growth, and potential deregulation benefits.
  • Capital One: Cramer favors Capital One, especially with its potential acquisition of Discover Financial. He believes the combined entity could compete effectively against traditional banks, Visa, and Mastercard. He owns this stock for his charitable trust.
• Aerospace and Defense:
  • GE Aerospace: A "huge winner" since General Electric's breakup, led by Larry Culp. It has a large backlog and strong visibility.
  • Northrop Grumman, RTX, and Lockheed Martin: Cramer suggests these defense stocks are attractive, particularly RTX, as countries may buy military hardware to improve relations with the Trump administration.
• Consumer Staples:
  • Kimberly-Clark: Cramer believes Kimberly-Clark has improved under CEO Mike Hsu.
  • Procter & Gamble: May benefit from a weaker dollar.
  • PepsiCo: Faces challenges due to expensive potato chips.
• Technology:
  • Tesla: Cramer suggests Tesla needs to redefine itself as a technology company with robots and self-driving cars, not just an EV play.
  • AT&T: Cramer believes AT&T will have one more good quarter.
  • IBM: Has been "hunting" as a consultant since spinning off Kyndryl and is winning lucrative contracts.
  • Lam Research: Faces challenges due to government restrictions on its China business.
  • Alphabet (Google): Faces legal challenges and competition from ChatGPT, Grok, Claude, and Gemini. Cramer questions the modelability of advertising gross margins due to the antitrust loss.
  • T-Mobile: Cramer praises T-Mobile's aggressive deals and Mike Sievert's leadership.
• Airlines:
  • Mixed performance: Delta is bad, United is good, Southwest is strong, and American is in the Delta camp.
• Restaurants:
  • Chipotle: Cramer believes Chipotle could "ignite" with its new Honey Chicken option.
• Enterprise Software:
  • ServiceNow: Cramer is betting on CEO Bill McDermott to prove doubters wrong, despite concerns about government business.
• Gold Stocks:
  • Niko Eagle: Cramer recommends Niko Eagle as the best gold stock due to its high-quality ore mines in North America.
• Pharmaceuticals:
  • AbbVie: Cramer would buy AbbVie ahead of its earnings report, expecting good numbers and a move towards its 52-week high.

3. Specific Stock Analysis and Commentary:

• Boeing: Cramer wants to own Boeing but is concerned about its cash flow due to production issues. He will recommend buying if the cash flow improves.
• GE Vernova: The old General Electric power division, now essential for building out electric power for the grid to support data centers. Its stock performance is tied to the recognition of ongoing data center construction.
• Nike: Cramer expresses concern about Nike's China exposure and suggests the stock may not perform well. He prefers Starbucks over Nike.

4. Notable Quotes and Statements:

• "My job is not just to entertain but to educate you."
• "There's always a bull market somewhere, and I promise to help you find it."
• Regarding President Trump and Jay Powell: "There's only one beholder in this whole country. And it ain't Jay Powell."
• Regarding Capital One and Discover: "Talk about deregulation, please."
• Regarding Tesla: "Elon Musk, bring on the humanoids. It's their time."
• Regarding Boeing: "Nothing cures a trade deficit faster than buying dozens of airplanes from Boeing."
• Regarding Alphabet: "You can't model the advertising gross margins in 2027 because of that lawsuit lost."
• Regarding companies in general: "The companies themselves, they keep delivering and delivering."

5. Technical Terms and Concepts:

• Charge-offs: Debts that a creditor doesn't expect to be repaid.
• Deregulation: The removal or reduction of government regulations.
• Gross Margins: The difference between revenue and cost of goods sold, expressed as a percentage.
• Backlog: The total value of orders that a company has received but not yet fulfilled.
• Same-Store Sales: A measure of revenue growth for stores that have been open for at least one year.
• Enterprise Software: Software used by businesses to manage operations.
• Recession-Resistant Stocks: Stocks that tend to perform well even during economic downturns.
• Cannibalism: In the context of Alphabet, refers to the company's own products (like Gemini) potentially taking market share from its existing products (like Google search).

6. Logical Connections:

• The discussion of the Federal Reserve and interest rates leads into the impact of tariffs on inflation, which then connects to the overall market reaction and the importance of earnings season.
• The analysis of individual stocks is grouped by sector (banks, aerospace, consumer staples, technology) to provide a structured overview of potential investment opportunities.
• The commentary on China exposure links various companies (Nike, Lam Research, Procter & Gamble) and highlights the risks associated with trade relations.

7. Synthesis/Conclusion:

Cramer's game plan for the upcoming week focuses on navigating the complexities of earnings season, political uncertainty, and macroeconomic factors. He emphasizes the importance of individual company performance and suggests specific stocks to watch in various sectors, while also cautioning about potential risks related to China exposure and regulatory challenges. Despite the perceived "terrible time," Cramer remains optimistic about the ability of companies to deliver strong results.