view transcript

THEME NUMBER ONE: the sales and earnings are a lot better than you would have expected given that we just went through a bear market of extraordinary proportions. That's because there was no actual reason for the bear except the fed simply relied on old hack rules and a paltry amount of homework to develop a thesis that said we are at full employment so we will soon be at full inflation. How embarrassing that it chose that course just when the consumer price index was going negative, a total misread of the scenario at hand?

The fact is, though, it caused a huge pause in the economy, pretty much end to end, which allowed perhaps the most important behind-the-scenes transformation to occur: the system got lean. There are lower inventories across the board in pretty much every industry. Sometimes you get these events that are crystalizing, and they put things into context. Yesterday, Under Armour reported a not so hot quarter but, most important, it signaled that inventory was down dramatically year over year. I think that's emblematic of the moment which brings me to crux of theme number one: you can buy the retailers again without much worry, especially now that we will have gotten to some sort of trade deal. This group had been suspect going into this reporting season for three reasons: 1. Worries about higher rates, 2. Exposure to Chinese goods, 3. Amazon, and 4. The debacle that was Macy's.

What's happened? Rates have had a dramatic decline while stocks have gone higher reversing a wealth effect that had gone negative. 2. By pushing off the trade deadlines-something that will most likely happen again-the president has given business more time to shift supply chains out of China. It's not easily done because it is a two-step process: first you have to find similar factories, or even build them, and then, more important, you have to have a steady chain of logistics that gets the goods from the factory to the ports, which has proven to be the real sticking point that has hindered the change. Three, Amazon turned out to be less potent than we thought, given that it has chosen not to use Whole Foods to ignite price wars all over the place as those who owned, say, CVS or Kohls, or even Target or Walmart might have thought. More on that when I invite my colleague, Jeff Marks, up to speak. Finally, January 10th of this year will be a day that will leave in retail infamy. That's the day that Macy's announced a truly horrendous finish to its quarter while other retailers reported excellent results including raised forecasts. But the etfs and the general stupidity and thoughtlessness of many managers caused Macy's to be extrapolated incorrectly. So, look for a reversal of fortune in that group. We have Walmart in the bullpen and, after the bounce back of stocks like Stanley Black & Decker, Masco and Sherwin Williams I am sorely tempted to add Home Depot, which is still a staggering thirty points from its high. I think it could be a lean inventory strong spring selling season.

The bear is behind us. 

Or, at least, the bear that the market saw last quarter is behind us, according to Jim Cramer. 

"The sales and earnings are a lot better than you would have expected given that we just went through a bear market of extraordinary proportions. That's because there was no actual reason for the bear except the fed simply relied on old hack rules and a paltry amount of homework to develop a thesis that said we are at full employment so we will soon be at full inflation. How embarrassing that it chose that course just when the consumer price index was going negative, a total misread of the scenario at hand?" Cramer said on his exclusive Action Alerts Plus members-only call. 

So, what does that mean?

"You can buy the retailers again without much worry, especially now that we will have gotten to some sort of trade deal," Cramer explained. 

Want to see what else Cramer had to say? Non-members can sign up here to watch the full call.

Jim Cramer's Five Themes Investors Should Watch Out for in the First Quarter