Stock futures moved higher Friday as optimism was boosted by the announcement of a roughly $1 trillion bipartisan deal on infrastructure spending.
Cramer: Spotting Market Rotations
TheStreet Founder Jim Cramer shared his thoughts with Katherine Ross about market rotations.
Cramer, who wrote about this issue in a recent Real Money column, pointed to the consumer price index for May, which came in at 0.6%, a slight increase from April's read.
"I think you have to be willing to meld dramatic headlines with stocks and relate them," he said. "And don’t be so quick to get caught up in the latest discussion: value vs. growth or cybersecurity vs not secure companies."
Those are things that are in play, he continued, and what really mattered were the big investors, who felt that the CPI "was so hot that they couldn’t wait for the Fed to move."
"They had to say the Fed was going to move, and therefore you had to get out of cyclicals and get into the companies that have a high price-to-sales ratio," Cramer said.
Price-to sales is "usually dicey," he said, citing such examples as DocuSign (DOCU) - Get DocuSign, Inc. Report, Snowflake (SNOW) - Get SNOWFLAKE, INC. Report, Zoom Video Communications (ZM) - Get Zoom Video Communications (ZM) Report and Cathie Wood's ARK Innovation ETF (ARKK) - Get ARK Innovation ETF Report.
DocuSign recently reported a narrower fiscal-first-quarter loss and the stock is up 24% year to date.
"That was the chance to buy ARK," Cramer said. "It’s interesting many people, including me, felt the idea where she said, 'listen, this is where it’s going to be the right time to buy high growth.'
"[And] it turned out to be right because ... the perception was high CPI Fed will raise, got to buy stocks that do well when the Fed raises, and that’s been playing out."
Now people are starting to recognize that, Cramer said, "and I'm wondering if it isn’t too late."
"They're not going to raise," he said, "inflation is going down. Maybe these cyclicals like Union Pacific (UNP) - Get Union Pacific Corporation Report are right. That's what we think at Action Alerts."
Union Pacific fell short of Wall Street's first-quarter earnings expectation in April. The shares are up nearly 5% year-to-date.