Jim Cramer shares his views every day on RealMoney. Click here for a real-time look at his insights and musings.
Cramer: We're Entering a World of Unknowns
Posted at 4:13 p.m. EDT on Wednesday, Nov. 9, 2016
Far be it from me to throw cold water on any rally, relief or otherwise. But a week from now, we will probably not be talking about a magnanimous Donald Trump and a gracious Hillary Clinton around here. We may not remember that this week's rally so far, 3.5%, is the strongest of 2016.
No, I am not saying they will be pointing fingers any more or trash talking every minute. I am saying we will be stuck in a world of some unknowns that will be a source of anxiety and therefore selling, and not comfort and therefore buying.
When the euphoria dies down, here's what we will be thinking about.
First, how independent will the Federal Reserve be of President Trump? Will Janet Yellen finish her term? Will Trump break with protocol and denounce the Fed for keeping rates recklessly low? That's a bad headline.
Two, we think Trump will greenlight mergers because they are good for business, but what if he says they are anti-competitive and he'll appoint people to block them, like he wants the Time Warner (TWX) -AT&T (T) tie-up blocked? Maybe he puts a stop to the big health care mergers like Humana (HUM) -Aetna (AET) and Cigna (CI) -Anthem (ANTM) , which are already being contested by the Justice Department? M&A has been a major prop of this stock market.
Three, what if he is true to his word and says NAFTA's dead? Sure, we get fewer jobs going to Mexico, but they aren't coming back. Instead, we get higher prices, inflation. Not positive for stocks. You may not like the jobs they take away, but you might like the cheap prices of goods they afford you.
Four, who is going to be Treasury secretary? What if he picks someone from left field, a real rebel? So much for the big bank stock rally.
Fifth, what if he starts a trade war? It's one thing to bust NAFTA and demand fair trading. We've been on the losing end of our trade deals for years. In the typical trade deal, we let the Chinese make stuff and pollute the hell out of the environment and then ship it here for well under cost to keep their jobs and take away ours. That has to end.
But what if the Chinese decide no longer to buy Boeing (BA) planes? What if the party stops allowing Starbucks (SBUX) or Yum China (YUM) or Nike (NKE) or Under Armour (UA) to open stores or sell goods? You know they could do that. Same goes for capital projects that might involve Honeywell (HON) or Emerson (EMR) or General Electric (GE) or United Technologies (UTX) . Maybe they say no to our diapers, baby formula, shampoo and toothpaste. Or they take away slots from our airlines. Or slap tariffs on our cars. Earnings will be slashed for many of the stocks that rallied today. (Starbucks and General Electric are part of TheStreet's Action Alerts PLUS portfolio. Under Armour is part of the Growth Seeker portfolio.)
What if the move in interest rates keeps accelerating? Mortgage rates go up too fast and housing gets hurt. Those stocks already started getting hurt today. In the meantime, the bond market-equivalent stocks, the big packaged-goods yielders and the real estate investment trusts and utilities see their stocks annihilated.
Finally, what happens if we start drilling for more oil at the same time the dollar soars because of our higher interest rates? An American-made glut in oil has meant lower stock prices. A stronger dollar clips earnings estimates for the big international enterprises.
I am not saying be careful what you wish for. I am simply acknowledging that we will soon be factoring in some sobering narratives. Don't get cocky. Relief rallies don't last when faced with a new set of facts. They just tend to fade away.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long SBUX and GE.
Cramer: Game On -- 4 Huge Moves Trump Could Make
Posted at 8:22 a.m. EDT on Wednesday, Nov. 9, 2016
He's a business person. He's anti-regulation. He is willing to borrow. He wants to cut taxes.
These are things bulls like in a President. There's a lot of other baggage that comes with President Trump.
But those are core tenets and they are views that send markets higher.
We have to borrow to pull of his vision. Rates are very low so he could easily offer a trillion-dollar 30-year -- he has said he wants to spend a trillion in infrastructure -- and it would be lapped up. All of the goodies that come with infra spending, Martin Marietta Materials (MLM) , Vulcan Materials (VMC) , Cummins (CMI) , Caterpillar (CAT) , all go up enough, especially the latter two because people will feel that they can make up for what had been a slow U.S.
So the downside?
The Fed will take rates up and up.
So now upside again: buy banks, they win.
Plus, if you crush regulation there will be more businesses opened. If you cut rates there will be more risk taken. There will be more building.
That's what happens.
Now the biggest move he could make to get the bond vigilantes off his back is to get back some of that $1.6 trillion that's overseas. He's got to find a way to get it back.
Second biggest move: get the government off the drug companies' backs.
Fourth: let the mergers occur. The Justice Department's antitrust division will be eviscerated.
So, sounds like everything's a buy.
Rates going higher are bad for the bond market equivalents.
We will be in a much more uncertain world, particularly with the Middle East.
Third, 17 out of 30 stocks in the Dow, for example, need more globalization, more foreign trade.
I cannot imagine a scenario right now where world trade is spurred by this election.
Sometimes it will be a balance. More pro drug but can our drug companies be boxed out?
But consumer packaged goods? They can get hurt.
So we have to give up the 2% we gained since James Comey vindicated Clinton.
And then it's game on.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long SBUX.
Cramer: Health Care Stocks and Banks Could Be Trump Winners
Posted at 5:58 a.m. EDT on Wednesday, Nov. 9, 2016
Do you sell it or buy it?
Of course, it depends on the level. But we can at least recognize that the stock market was trying to get its arms around a possible Trump win ever since FBI Director James Comey came out with the new batch of emails that re-opened the Clinton email server.
We had nine straight down days, the longest streak in years and then we tacked on a couple of percentage points when Comey repealed his surprise, so you know we have to give that Monday and Tuesday rally up as it was based on a Hillary victory.
But here's the real issue here. When we look at what Trump has talked about economically -- not about lifestyle -- but economically, he wants his cake and eat it too.
He wants lower taxes. He wants more growth. He wants less globalization but more trade. He wants other countries to take our goods and he wants to retaliate against them for taking our markets. If he got his way, it would be amazing for American business and you could see why you would want to buy everything that's involved in world trade.
Except, that's the real issue: we have negotiated a tremendous number of trade deals that have helped our international businesses. If Trump pushes that agenda, I could count 17 stocks out of 30 in the Dow that would suffer from potential retaliation and a shrinkage of world trade.
That's a lot of the Dow. It's why I think the rebound off last night's lows is too glib and I wouldn't bite up here.
I talk to a lot of the CEOs of those companies. Their biggest fear if Trump won is that doors would close to additional business. What they might make up here, say in more infrastructure, they will lose to foreign competitors.
Seventeen companies where you could take numbers down because they have so much international earnings that are in jeopardy, and it won't be made up by weakness in the dollar that we are seeing this morning.
I think that when you have a Republican Congress and a Republican President you have the heat taken off the drug companies. Consider Johnson & Johnson (JNJ) , Merck (MRK) and Dividend Stock Advisor portfolio holding Pfizer (PFE) : these are three potential winners.
They have huge overseas earnings, presumably those earnings will be coming back here because a unified government will make changes that allow that foreign cash to be repatriated and the governments overseas aren't going to retaliate and shut down their borders to these drugs.
We have Goldman Sachs (GS) and JPMorgan (JPM) , which are both companies that did well with Brexit, the analogous shocker. I think they can do well again now on this for trading, but I am sure others will say this stays the Fed's hand come December.
And when it comes to oil, we have a new president who is pro drilling -- but more important, Iran is one of three countries where the policy is going to change, Mexico and China being the other two -- and that means you can expect that international tensions will be on the rise and that could mean good things for Chevron (CVX) and Exxon-Mobil (XOM) .
Finally, you could argue that the Fed stays on hold because of this turmoil and it would make it so Verizon's (VZ) yield at 4.85% is worth grabbing, unless this bond selloff continues.
Frankly, those winners certainly can't offset the losers. Which is why you can't just blindly buy.
Nor can you assume that after we repeal the last 2% we tacked on when Comey reversed his view, that you can just go buy as if the market had fully discounted a Trump win.
There are too many companies that can be retaliated against if Trump goes hard.
But you also have to recognize one other totally bizarre crazy fact, but it is one I keep thinking about from the time I worked with Trump as a judge on the Apprentice: the Ratings.
The Trump I know would regard the stock market as ratings. He has always felt that the Chinese and the Mexicans got the better deals when it came to trade.
But he also knows that when the stock market goes up he thinks that's a sign of economic health if done well, based on growth.
So it's possible he mitigates the rhetoric that could cause retaliation and the 17 stocks that could see their earnings cut back because of trade war will have their misfortunes mitigated.
Otherwise, here's my take: too many stocks are still prepped to get hurt that anyone can cavalierly just come in and buy everything.
But domestic stocks and beaten-up health care names? They work.
Or, to put it another way, the stocks that had been doing the worst -- the domestics and the health cares -- the ones that were regarded as the nemesis of Hillary -- could be the winners. The banks, if the rates keep going higher, are the other terrific place to be. There just aren't enough in the Dow.
There are plenty of them elsewhere to go around.Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.