Last week, TheStreet's Jim Cramer, co-manager of the Action Alerts PLUS portfolio, explained why the Federal Reserve's recent comments backing away from its plan to hike rates vigorously in 2016 helped spur a stock market rally.
However, it usually takes more than one push to get stocks to reverse direction. This case is no different, and Cramer attributes part of the rally to China.
China remains a very big concern for U.S. investors, as it is one of the largest and fastest growing economies in the world, and it has been slowing in recent quarters.
The Chinese stock market was closed earlier this month for the Chinese New Year, and the fear was that when it reopened, it would tank, Cramer said. However, the opposite actually happened. Chinese stocks rallied.
That helped U.S. investors breathe a sigh of relief.
It also helped that U.S. companies -- many of which have been relatively downbeat because of China, especially industrial stocks -- actually had positive commentary. Cummins (CMI) - Get Report , for example, said its business is bottoming, which is a "big change of tune" from what management has been saying for more than a year, Cramer said.
Some are worried about a hard landing in China that could collapse the entire global economy. But Cramer reminded investors that China still has reserves. And because it's a communist-run country, the government can make things work when it wants.
When companies couldn't get financing from the stock market, the government suddenly allowed convertible bonds to be floated, Cramer said. That's something that doesn't get talked about often, but it's become "the de facto way to raise money" and has taken some of the pressure off China's stock market, he explained.
Even though China isn't flashing the all-clear sign just yet, there are positive developments that are giving U.S. investors some relief. When combined with other catalysts, that's helping stocks move off the lows and rally higher, Cramer concluded.
At the time of publication, Cramer's Action Alerts PLUS had no position in companies mentioned.