Jim Cramer is reacting to Amazon's (AMZN) - Get Report blowout quarter, how Chevron (CVX) - Get Report and Exxon (XOM) - Get Report are impacting the markets as well as the importance of understanding how taxes on the rich will really impact stocks in the video below:
Why You Need to Diversify Your Portfolio
"Thursday was a great lesson in diversification, Jim Cramer told his Mad Money viewers. We saw investors rotating out of anything that requires microchips, which are in short supply, and into snack chips, where companies like PepsiCo (PEP) - Get Report continue to see strong demand. This was a classic rotation from tech into the safety of food stocks, Cramer said, and it won't be the last," TheStreet's Scott Rutt wrote in his Mad Money recap.
"The food stocks have something the tech stocks don't -- dividends. This is especially important in a world where capital gains taxes might be going up. If they do, that means dividends only get more attractive," Rutt continued."That's why you need a diversified portfolio, Cramer concluded. If you invest in both microchips and snack chips, you're sure to come out ahead no matter which way the winds on Wall Street are blowing."
Will Raising Taxes on the Rich Hurt Stocks?
Cramer says no.
"There's a fundamental misunderstanding between tax policy and the stock market's direction. We keep thinking that it's incredibly odd that the stock market could romp during President Biden's first 100 days given how he is attempting to raise taxes pretty meaningfully for the rich, the millionaires and above, and therefore the stock market has to go down," he wrote in his Real Money column.
"The first misunderstanding? The owners of stock. We know that probably about 55% of stock is indexed and an index owner is not a renter. We have tens of millions of people who own stock, but they own it until they can't, until they have to take distributions. Even then, amazingly, we have not seen the pressure, the natural pressure from retiring baby boomers. They just don't seem to be sellers, and the ones who have turned 72, when you are supposed to pull out money, haven't hurt the market on their exit. If you didn't know better, they take the money out and put it back, perhaps in a plain old non-tax advantaged account," Cramer continued.
Amazon smashed its earnings expectations.
TheStreet's Martin Baccardax noted that Amazon reported net income for the three months ending in March was pegged at $15.79 per share, more than tripling last year's $5.01 total and smashing the Street consensus forecast of $9.54 per share. Group revenues, Amazon said, surged 44% from last year to $108.5 billion, topping analysts estimates of a $104.55 billion tally.
“Two of our kids are now 10 and 15 years old—and after years of being nurtured, they’re growing up fast and coming into their own,” said CEO Jeff Bezos. “As Prime Video turns 10, over 175 million Prime members have streamed shows and movies in the past year, and streaming hours are up more than 70% year over year. Amazon Studios received a record 12 Academy Award nominations and two wins."
"In just 15 years, AWS has become a $54 billion annual sales run rate business competing against the world’s largest technology companies, and its growth is accelerating—up 32% year over year," he added. "Companies from Airbnb to McDonald’s to Volkswagen come to AWS because we offer what is by far the broadest set of tools and services available, and we continue to invent relentlessly on their behalf. We love Prime Video and AWS, and we’re proud to have them in the family.”
Hear what Jim Cramer is only telling members of his Action Alerts PLUS investing club in Friday’s Daily Rundown.