Tariffs are a government mandated, supply shock, says Jim Cramer
By CNBC Television
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Key Concepts:
- Recession: A significant decline in economic activity.
- Tariffs: Taxes imposed on imported goods.
- Mitigation: Actions taken to reduce the negative impact of tariffs.
- Supply Shock: A sudden disruption in the availability of goods or services.
- Magnificent Seven: A group of seven high-performing tech stocks (formerly a key market driver).
- Hyperscalers: Companies that provide large-scale cloud computing services.
- Oversold: A condition where an asset's price has fallen excessively and is expected to rebound.
- Terra Firma: Solid ground or a stable foundation.
1. Recession Concerns and Employment Data
- The main concern is whether the U.S. is heading into a recession.
- Cramer argues against an imminent recession, citing the strong job market.
- He acknowledges that tariffs will cause harm, higher prices, and potential shortages.
- Mitigation efforts by companies often involve supply chain cost reductions and potential layoffs.
- The monthly labor report is anticipated to be robust, further supporting the argument against a near-term recession.
2. Market Rally and Historical Data
- Ryan Dietrich pointed out that historically, after three consecutive days of the market rallying by more than 1.5%, the market has gone higher ten out of ten times, with an average gain of 21.6%.
- Cramer considers this historical data "dispositive," indicating a strong likelihood of continued market gains.
3. Tariffs and Consumer Behavior
- Tariffs are described as government-mandated supply shocks.
- Cramer believes American consumers will adapt to living with less if necessary.
- Retailers like Costco and Walmart have significant market power to negotiate lower prices with suppliers, offsetting some tariff impacts.
- Marginal players (smaller companies) are more likely to be negatively affected by tariffs.
4. The "Magnificent Seven" and Market Leadership
- Cramer argues that the "Magnificent Seven" stocks are no longer the primary drivers of the market.
- Media and ETF creators are overly focused on these stocks.
- He notes challenges faced by individual companies within the group:
- Apple: Potential sales decline in a high-tariff environment and scrutiny from both the U.S. and Chinese governments.
- Nvidia: Competition from Huawei's rival H100 chips and a stock that has been "soggy" for months.
- He suggests focusing on the other 493 companies in the S&P 500.
- Hyperscalers face increasing costs for computing power, which could impact Nvidia.
5. Political Factors and Market Impact
- President Trump's approval ratings are not necessarily indicative of the stock market's direction.
- Trump's policies, particularly tariffs, have been integral to the stock market collapse.
- If Trump shifts back to his "first term mode" (more market-friendly policies), stocks could soar.
- The market is currently "baking in" the new Trump, but not the possibility of a return to his earlier policies.
6. Listener Questions and Stock Recommendations
- Chipotle (CMG): Cramer believes the stock is at "terra firma" and is rarely down for so long.
- Intel (INTC): Currently "dead money," but Cramer believes in the new CEO (Lipton) and suggests it could be a good long-term investment.
- Citigroup (C): Not Cramer's favorite bank stock. He prefers Capital One (COF) and Wells Fargo (WFC).
- Domino's (DPZ): A good example of a company without tariff problems.
7. Gold and Mining Companies
- The segment teases a discussion about mining companies like Agnico Eagle and the role of gold in the current market environment.
8. Conclusion
- Cramer advises against betting against the market and suggests increasing stock positions on the way down after the market becomes oversold.
- He emphasizes the importance of staying the course and recognizing that the market could move higher quickly.
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