Here are 4 things that could go right for stocks — and what would hold them back
Go back to early April. Take a look at those declines following “Liberation Day” on April 2, when President Donald Trump announced sweeping new tariffs on imported goods. The S & P 500 lost more than 10% in a couple of days and eventually bottomed out at 4,982 on April 8. Now check the broad market index’s close on Friday: 6,728. Did you consider it a buying opportunity when the index dropped below 5,000? Did you question whether it would ever come back? But during that bottoming process — it is never just a bottom — Trump on April 9 posted on Truth Social that it was a “great time to buy” and walked back the outrageous tariffs that hurt Democrats, Republicans, voters, and shareholders. It was a shocking turn of events, and it left many investors wondering: “How in heck did I leave this market? What was I thinking?” On Saturday, I met dozens of Club members while signing Fósforo Mezcal bottles at the Total Wine & More in West Hollywood. Most of them wanted to thank me for Nvidia . Many showed me their statements, and, as happened at our October monthly meeting with CEO Jensen Huang, people told me how their lives had changed. It seemed like a terrific time to tell people to cash out. Why not? They’ve been winners. You only need to get rich once. I certainly blessed anyone who wanted to trim. But to get out now, as I advise against in my recent book, “How to Make Money in Any Market,” I couldn’t suggest turning tail. What happens if we get oversold, which is always a strong possibility? And then a host of things go right? The snap-back rally could be vicious. Given that much of the media focuses on everything bad, let’s list the good things that could happen: 1. The incredibly painful, totally infantile, Banana Republic government shutdown ends. Maybe it doesn’t end for months. Perhaps there’s a spike in TSA agents calling in sick, as it doesn’t seem like the shutdown would stop anything that we use and see, other than air travel. Trump figured that out and wagered, as he often does, that the people who have jobs at the Transportation Security Administration are Democrats or easily sacrificed. We understand that roughly 900,000 people are struggling to make ends meet. That’s just shameful. We all know it. Whichever side blinks is considered cowardly by the media, but probably not by the voters. Trump knows Fox News will hold him accountable if he gives in. Whatever. It will end. It shouldn’t have gone on this long. Traveling on Thanksgiving should give one side or the other a chance to give up with grace. When it happens, you have to be long stocks, as the endless number-cutting will finally cease. Even if that day comes with the S & P 500 at 6,000. 2. OpenAI CEO Sam Altman shuts up and stops doing deals. Until this man came on the scene, doing ridiculous deals with Oracle, we had a real chance to keep rallying. But his preposterously wide net, his endless minions, and his vicious style left us no choice but to scale back on the data center theme. I’m amazed at the number of people this man has taken in with his 20 billion run-rate boasts, including those we like and respect. We always questioned his spending, and the $18 billion Oracle bond deal, which was so poorly received, foreshadowed it all. I am a huge fan of OpenAI CFO Sarah Friar — she’s one of the best — but when she recently said the company was looking for a “backstop” to help it finance its investments, it couldn’t be walked back , erased, or forgotten. It showed you immediately what we all feared: OpenAI could be an Intel in the making — a national treasure, too big to fail, an entity that wants to take on everyone or else. We know President Trump is in no mood to help Altman dominate. So, the one-two punch of the Oracle deal and Friar’s ill-advised comments ended the Greatest Story Ever Told, which meant the huge part of the S & P 500 that was still working ended in its tracks. If Altman were to decide to get out of the headlines, we could go back to the decent strength the data center move was still providing. 3. The non-part of the data center bounces back. This industrial group, which includes chemicals, paper, steel, aerospace, and automakers, has provided no support or leadership whatsoever. When I spoke to GE Aerospace CEO Larry Culp last week, it was clear that aerospace remains a significant theme, but it has been overshadowed by the industrial ugliness that began at the start of the shutdown. Oddly, that’s the only connection I can trace back to the decline. The autos in particular have been ugly, as we have lost the theme of the tax credit for EVs. However, this could help in the short term, as carmakers typically generate the most revenue from their internal combustion engines, especially those with hybrid technology. It’s not easy to figure out what to do with the auto group, though, because of the collapse of Carmax , which has shown a dramatic decline in the price of wholesale cars, as reflected in the value of used cars at auction. Used car prices are finally sinking from their COVID-19 spike, but not fast enough to make new cars less prohibitive. Not enough inventory. However, car sales have held up rather well. That should bode well for the industrials, but not if rates stay high, as Leon Topalian, CEO of Nucor, the best steel company in the world, told me on “Mad Money.” 4. Home sales pick up. Jeez, this one’s just killing us in so many ways. First, we can’t entice people out of their 2-4% mortgages, so there is very little turnover. Second, the homebuilders don’t want to build too many homes because they know it could cause a collapse of their own. Three, the third rail of immigration keeps closing in. Immigrants lacking permanent legal status are afraid to find work, and there are hundreds of thousands of them who came in under President Joe Biden’s first couple of years. We have no idea what is going to happen here, but the ICE brutality presumes that this cohort won’t receive the necessary work to build homes with a higher gross margin. The homebuilders have been trading off gross margin. Sixteen percent of the country is Hispanic, and it does seem as if there is a total pullback in their spending and in their home buying, which requires real documentation. Third, all the things that come with buying a home, including its trappings of personality, aren’t selling well. You can’t take homebuilding out and shoot it. There is too much at stake, especially with non-public companies that provide personnel for closings. This is a disaster, and it is totally unacknowledged. The good news is that all of these would be helped immensely by another interest rate cut. However, it’s challenging to initiate a genuine rate cut cycle with this level of inflation. Let’s look at what’s keeping prices high: Food inflation would be peaking, but the price of cattle is incredibly high, and the herd is as small as it was in 1951. You can’t wave a wand and fix that. Trump can try by yelling and screaming, but we just want results, which means importing as many cattle as possible, and the farmers will never go for that. Rentals, which are included in the Consumer Price Index (CPI), cannot decrease until more homes are built or interest rates decrease. Vicious cycle there. Workers are too hard to find. That’s a function of the immigrant round-ups, and leaves little room for wages to settle down. Many of the things we buy are cheaper at Costco or Amazon , but the sample doesn’t take them into account, so goods inflation appears to be unabated. The collapse in used car prices could help, but it needs to happen quickly. Tariffs are now biting across the board. As you can see, spending power isn’t increasing, especially with student loan payments resuming, but inflation itself is not declining. President Trump doesn’t appear to be running again, although the Constitution doesn’t seem to be much of a barrier to many things so far. I am sure that his minions are searching for a reasonably sounding exception, and that means there’s no lash of inflation like there was for Kamala Harris. We can’t count on the Federal Reserve, even as so much is going wrong and there is such a slowdown. It’s truly disconcerting because inflation cannot be allowed to restart. It would help if the Supreme Court were to strike down the tariffs. I cannot see a downside to that move because the tax cuts are significantly larger than the revenue generated from tariffs. The farcical nature of it all is that without immigration, we don’t have enough workers to staff the factories that the foreign entities have to build, let alone how much Apple has committed to spend. Trump is a whirlwind of inflation denial, so it will take the Supreme Court to beat it back. I don’t know how long it will take for the Court to deliberate, but if Justice Neil Gorsuch is against them, Trump is out of luck. It does seem likely that the president may disobey the Supreme Court, but he doesn’t personally collect the taxes, thank heavens. But let’s consider what could happen here. We might get a tariff strike-down right before President Trump’s proposed initiative to provide a one-time $1,000 contribution to an investment account for every newborn American child kicks in. This flood of money into the S & P 500 could counteract much of the pervasive, palpable negativity. Not to mention, the last two months of the year have historically been strong ones. I mean, like every time. It’s reasonable to assume that we come in every Monday and we get plenty of mergers. Good for the banks and good for the market. We forget how bullish mergers can be because Biden basically put a ban on them. I regard them as more important than anything, except interest rates and earnings. That combination of mandated funds from infants and a decline in stocks due to mergers creates a very positive backdrop. Remember, “money in” means money to the Mag 7. There’s one other positive that is being overshadowed by the theoretical collapse of the data center: Many new tech cycles are kicking in, including cellphones, PC servers, and unbelievably, the cloud (again). That means you can see some good gains from companies like Lam Research and Dell, and not just the storage plays, such as Western Digital , Micron , Sandisk , and Seagate , which invariably make up four of the top ten S & P 500 leaders. However, let me share with you a core concern that I’m struggling to overcome: the speculative nature of this market has led to a situation that mirrors what I feared from the 2000 crash. We have many stocks that aren’t talked about as speculative, the alternative energy, quantum computing, rocket, data center pretenders, and virtually everything crypto that are sucking the life out of the market because they create a casino feel that is abetted by the endless creation of ETFs for everything that’s red hot. They are causing an ill-considered tableau that makes it seem even more hazardous than just the endless talk of concentration of very good companies with very good balance sheets. Those quality companies aren’t the real problem. The speculation that is occupying the younger cohort is what’s driving the market, and it’s a real bad driver. If we get rate cuts, you will see a real rally in anything with a 4% handle, including the consumer packaged goods stocks, which are currently toxic waste. It could be a generational low in the drug stocks, again, especially with the 2026 Trump gifts. But we need to get there. We need to get to where the Fed is cutting. We need to dismantle the tariffs. We need to maintain earnings growth. We need to have Sam Altman shut up. Tall order? Yes. But so was the sell-off back in April. We just need a little churning and a decline of some of the big winners to get us more oversold than we are now. That will require the short base, like you saw in Texas Roadhouse on Friday, to kick in and have some power and fear. Right now, if you are short, you are pressing your delicious bet because of so much going wrong. The clock, however, is ticking against the shorts and in favor of the bulls, as preposterous as that seems at this red-hot moment. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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