The stock market started strong in 2021, after solid gains last year, despite the coronavirus pandemic. According to Jim Cramer from CNBC, one reason for the rally to continue in action is simply the lack of people willing to sell.
“There are not enough stocks to circulate,” Cramer told Squawk Box. “The stock market is not divorced. The stock market reflects the strength of individual companies. There are 500 companies in the S&P. Probably 400 of them are doing better than I thought” they would do during a pandemic.
On Thursday, the Dow Jones industrial average and the S&P 500 closed for the first time over 31,000 and 3,800, respectively. The Nasdaq also eclipsed 13,000 during the session, its initial trip above this level. Friday’s Dow was virtually flat, while the technology-intensive S&P 500 and Nasdaq moved higher into early trading.
Cramer acknowledged that making sense on Wall Street against a persistent pandemic, ongoing economic turmoil and unrest in Washington may seem like a challenge. “It’s a very strange, different time. All in all, there’s no playing card,” Mad Money host later told CNBC.
“People come and talk about value versus growth. We liked value in the morning and then the next day, each growth stock grew much more than value,” he said, referring to a generic scenario. “Is there a model here? Yes. People want to own shares and there’s not enough stock. There just isn’t – not yet.”
Some prominent investors have expressed concern about the massive evolution of stocks since the end of March, when coronavirus-induced sales fell; The S&P 500 has risen about 70 percent since then. Carl Icahn issued a warning to CNBC’s Scott Wapner earlier this week and said he was covered accordingly.
“In my day I saw a lot of wild rallies with a lot of stocks with the wrong prices, but there’s one thing they all have in common. Eventually they hit a wall and go into a major painful correction. It happens. “But when that happens, look down,” the billionaire investment titan said Monday.
The pandemic and its impact on the stock market created a different situation than in the years before the dot-com collapse, Cramer said. Highly speculative internet stocks helped boost the Nasdaq by more than 500% from 1995 until March 2000, when the bubble burst.
“It is not 1998 [or] 2000, “Cramer said of the current market rally during the pandemic.” If you open the economy, then you will fly Disneys of the world. And, as the economy remains closed, you have a lot of stocks, the Amazons, flying. A lot of things fly. “