There has been much debate about whether the S&P 500’s recent break above all-time highs was the result of a new bull market that began in March, following the steep coronavirus-induced drop in February, or is simply a prolonged bear market rally. For CNBC’s Jim Cramer, there may be more pain ahead as stocks and index ETFs potentially run out of steam.
“I’m thinking, wait a second, don’t get too optimistic. I think it’s our nature to be optimistic,” Cramer said on “Squawk on the Street, following initial jobless numbers from last week.” “We like the fact that the market is going higher because our viewers own stocks. But right now we seem gassed.”
The Labor Department said Thursday that initial jobless claims for the week ended Aug. 15 came in at 1.106 million. Economists polled by Dow Jones projected a total of 923,000. Initial claims for the previous week were also revised higher by 8,000 to 971,000. Last week marked the first time in 21 weeks that initial claims hit below 1 million.
“Are these numbers worrisome? Well yes, if you don’t get a stimulus package — and yes, if you don’t get a vaccine,” Cramer added. “I think be prepared for more of these numbers.”
The stock market has experienced the fastest recovery in history from its pandemic-induced sell-off, with the S&P 500 on Wednesday achieving another intraday high, stoked by corporate behemoths like Target, which reported strong quarterly earnings. But that new peak was short-lived, as stocks quickly tumbled following a dire outlook from the FOMC Minutes.
After attempting to hold onto fresh highs in the S&P 500, stocks tumbled following the FOMC Minutes released on Wednesday, which revealed the Fed still had serious concerns about the effect of the coronavirus on the economy and suggested rates could remain unchanged for the time being.
For Cramer, this presents some challenges to what many investors see as a completed, ‘V-bottom,’ giving the all-clear signal for the economy.
“I think this is the two economies. The ‘V-shaped’ recovery in stocks is not the ‘V-shaped’ recovery in the economy,” Cramer explained. “You may be joyous about Target, and terrific numbers that we got from Lowe’s. But this is the real world; real world not so hot.”
Cramer seems to agree with the Fed that the economic fallout could last much longer than anticipated, and a robust stimulus package and vaccine are both crucial to get a clear resolution.
“We are right now beginning to realize that the pandemic has a recessionary impact that we hadn’t thought.”
“That’s why I’ve said over and over again to both sides, ‘Look you’ve got to make this so it’s open-ended,’” he said. “You’ve got to make it so we have something that gets us to the vaccine. No one wants to relate directly to why we have this problem. It’s not because of a slowdown. It’s because of Covid-19.”
For bullish investors looking to jump in the market after the S&P 500 notched fresh highs, the iShares Core S&P 500 ETF (IVV) may be one place to start. Contrarians can look to precious metals like silver, which has had an incredible run lately, using the Aberdeen Standard Physical Silver Shares ETF (SIVR).
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