CNBC’s Jim Cramer on Monday sought to focus on potential catalysts that can help propel stocks higher, saying he wanted to “put the downside risks to the side and focus on the upside risks.”
“You want to understand this market, don’t just focus on the downside risks. Sure, there’s a lot to worry about if you’re bullish, but there’s a lot more to worry about if you’re bearish,” the “Mad Money” host said.
Here’s Cramer’s list of six “upside risks” for stocks.
Wall Street is nearing the end of what’s been a “remarkable earnings season” as corporations navigate supply chain challenges and complications related to the Covid delta variant, Cramer said.
It is possible the next batch of financial results “could continue being very strong,” Cramer said. “From healthcare to the semis to the industrials to the banks, they’ve mostly done much better than expected, even if the market hasn’t always appreciated that strength.”
Cramer said bearish investors are losing sleep over the prospect that the Federal Reserve maintains its highly accommodative monetary policy a bit longer than expected due to the delta variant.
“There are just too many businesses being hurt by the virus, especially small businesses, which makes it much less likely the Fed will even talk about hitting the brakes on the economy instantly like some people say they will,” Cramer said. “Doesn’t matter that we got a fabulous employment number on Friday when we’re seeing over 100,000 new cases of Covid per day.”
New money coming into the market could help extend the stock rally, Cramer contended.
“There’s $4 trillion on the sidelines. We thought it was $3 trillion, but then we learned about an additional trillion sitting in money funds that can’t really stay there because their interest rates are so paltry, especially compared to high-quality dividend stocks,” Cramer said.
Relatedly, Cramer said increased activity from private equity behemoths such as Blackstone and KKR could also be on the horizon. “If we get a wave of leveraged buyouts that could offset the slowdown in takeovers, courtesy of the Justice Department’s tougher attitude toward antitrust, well look out,” Cramer said.
While GameStop and AMC are the poster children of the chat room-driven meme stock frenzy that began in January, Cramer said bearish investors need to be aware of the potential for their bets on other companies to backfire.
“AMD had been stuck in the mud for ages, waiting for the Xilinx acquisition to close, but there’s a substantial short position here, so the memesters struck and they bought up AMD hand over fist. You never know where they’re going to strike next,” Cramer said.
The bipartisan infrastructure package being negotiated is likely a boon for the economy, Cramer said, and the Biden administration’s recent extension of the eviction moratorium means “people who aren’t being evicted can use that money to buy things or even invest in the stock market.”
“Meanwhile, the child tax credit payments are pumping even more discretionary income” into the economy, Cramer said.
“Bearish hedge funds keep capitulating, and they have. They have to buy stocks in order to keep up with the averages. These guys would rather wait for a pullback, but this bull refuses to give them a good entry point,” Cramer said.