Financial market maven and CNBC “Mad Money” host Jim Cramer assessed Monday’s 600-point decline in the Dow Jones Industrial Average paired with the mass of sell-offs in October, particularly in the technology sector, as obvious signs the stock market is in “a very serious correction.”
In particular, the FANG (Facebook, Amazon, Netflix, Google-Alphabet) stocks have been on a downward spiral amid third-quarter earnings season, falling as much as 10% from their top-of-the-world 52-week highs. The fabulous four plus one more, if you want to include Apple, have been leading the growth-fueled, decade-long bull run strength to strength, but now things have gone awry.
Nonetheless, the red prices in FANG stocks should signal a buying opportunity for investors seeking a value proposition in these tech giants, but Cramer is noticing otherwise.
“Their stock is pretty inexpensive,” said Cramer. “They have more than $100 billion in cash. They own search. They own online video. They own the self-driving car market, at least for now. I think it’s an outright buy. But no one cares.”
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According to Cramer, a look behind the curtain of Monday’s 600-point slide into the red reveals the movement of money that is head-scratching, particularly during this time of the year.
“The thinking behind today’s action is surprisingly simple: money managers are buying the winners and selling the losers,” said Cramer on his CNBC show ‘Mad Money.’ “Unfortunately, there are a heck of a lot more losers than winners, and I want to put that into context because such behavior, frankly, is highly unusual this close to the end of the year.”
Last week, the Federal Reserve completed a two-day monetary policy meeting that resulted in unchanged rates, but the general consensus in the markets is that a final rate hike to end 2018 is imminent. In fact, the CME Group’s FedWatch tool is predicting a 75.8% chance of a rate hike come December.
Cramer ventures to think that one major trigger event is necessary in order for the Fed to continue its rate-hiking measures through 2019. In particular, the U.S. and China coming to some sort of tangible trade deal–a possibility given that U.S. President Donald Trump and Chinese President Xi Jinping will be in the same room at the G20 summit on November 30 at Buenos Aires in Argentina.
“We need to see a trade deal with China or some sign that the Federal Reserve will wait and see before it hits us with more rate hikes next year,” said Cramer. “We’ve been getting weaker for some time and the Fed doesn’t seem to care — they’re still very committed to the ‘destroy the economy in order to save it’ approach.”
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