When it seems nothing can take the market down, follow this rule
Government shutdowns should, theoretically, matter to the stock market. A shutdown could hurt spending power for up to 900,000 people, the highest estimate I have seen for those to be furloughed. That’s a lot of people who will spend a lot less money – especially because most Americans live paycheck to paycheck. Shutdowns still don’t impact the stock market – largely because of a bit of circular reasoning. It goes like this: The last six shutdowns have not hurt the stock market. Moreover, the market tended to rally a percent on average after the shutdown. So why sell? In fact, why not buy? So, the market goes higher. It doesn’t even occur to people that this time could be different, except to say that perhaps growth in our country might cool a bit more if President Donald Trump weaponizes the shutdown, making a case that the deep state is getting broomed. Retail sales might go down a tad, particularly in the Washington D.C. area, and that makes it even more likely that the Federal Reserve will have to cut interest rates further. If rates come down, then stocks go up, right? Circular reasoning. So, again, why bother to sell? Why not buy? What makes people so complacent, and I don’t mind using that word when every night in my “Mad Money” Lightening Round, I am faced with endless parabolic moves in data center plays, one-drug biotech firms, rocket companies, and anything connected to quantum computing or nuclear power. What makes them so sure that all of these stocks will go up? Why doesn’t there seem to be any profit-taking? Who needs me to say that you can’t be greedy when you know more than I do about making money in any market? I have two reasons why there seems to be no end to this speculative bull market that includes all things data center. Reason No. 1: The post-“Liberation Day” rally, the most important prop to 2025’s strength. The stock market benchmarks fell about 10% as the “end-of-the-worlders” were in control. The key day was April 8, six days after Trump announced his “reciprocal” tariffs, because that was when the extraordinary pivot from the bottom occurred. For perspective, the S & P 500 had traded down to as low as 4,982. It closed Friday at 6,715. The Dow Jones Industrial Average troughed at 37,645. Friday’s close was 46,758. The Nasdaq : 15,267 to 24,780. It has been a furious, unrelenting rally. At that key moment, we thought that all hell was going to break loose. The president seemed erratic. The tariffs made us feel, collectively, that we were back in an era like the 1930s, when the U.S. embraced the Smoot-Hawley Tariff Act, a protectionist regime the likes of which we all were taught in 10th grade was part of the Great Depression, if not a cause of it. In one 24-hour period, we learned that not only were we going to embrace such a financial cataclysm, we were going to exceed it. What happened to obliterate the bear case? The market, which the president had been ignoring, suddenly, down 10%, became front and center for him. Out of seemingly nowhere, the China hawk insiders at the White House, who were telling the president to stop globalism in its tracks, went out of favor, and the moderates, led by Treasury Secretary Scott Bessent, took over. We learned that everything was fungible, and these tariffs were just opening bids. We figured out that those numbers really were opening bids. What happened next is nothing but the seeming work of fantasy and the stock market gods: the president reversed course, exactly one week after announcing the stinging tariffs on April 2, and became conciliatory or at least as conciliatory as he can be toward trade and against the hawks. We didn’t know it at the time, but he wasn’t going to have a trade impact on the market. So, Trump said nations were calling him, begging for meetings to strike deals. There was tremendous skepticism, but they really were. The economy, instead of freezing because of so-called Liberation Day, spent a few weeks in the doldrums and then took off. It had no impact on the data center buildout, which was responsible for almost the entire U.S. gross domestic product growth anyway. Oh, and when the stock market started trembling again on the morning of April 9, and my “Squawk on the Street” colleague David Faber and I were talking about how the market was shaky, I am told the president was watching and he posted on Truth Social at 9:37 a.m. ET: “THIS IS A GREAT TIME TO BUY.” It was a great time to buy. Trump was right, of course, because hours later, he temporarily paused most of the tariffs. Those who sold got left behind. They couldn’t believe they could be fooled once again after another huge selloff. They went back in. Admittedly, they went back at higher levels. But they realized that there was indeed a “Trump put” after all. The president had said he wasn’t going to use the stock market as a barometer of his presidency, but he sure wasn’t going to let it crash under his reign. Ever since then, every dip in the market has been a buying opportunity, and it’s been right to do so. The sellers, those who got out thinking we were going to have a depression, were just plain wrong once again. They swore they would go back in, and emboldened by the action, went in with a vengeance. A new generation of buyers has sprung up seemingly out of nowhere. These buyers like anything that moves, whether it be the line in football, the hottest cryptocurrency, options on gold, or whatever the hottest trends might be out there. The double- and triple-leverage exchange-traded funds soared. Zero-day options — same day bets — became a staple. The volume on Robinhood went nuts. It’s an odd group of stocks that they chase. These names tend to be all about the future, the further out the better. A stock of a company that says it is not going to be profitable any time soon is perfect for these buyers. No estimates, no estimates to beat. Sometimes I think they can’t help themselves. They are caught between a company like big data company Palantir , which seemingly can do no wrong, and a Rigetti . The former, Palantir, has come from nowhere to be a profitable company with great growth. It is one of the best performers of the era. One year ago, the stock traded around $40 per share. Even with Friday’s 7.5% decline, Palantir closed at $173. The latter, Rigetti, is so far from profitable it is ridiculous. But last year this week, it was trading in $0.70s per share – 70 cents per share, not dollars – and Friday, it closed at $40. That’s a Mega Millions move, if I ever saw one. Who doesn’t want something like that to happen to them? These are life-changing moves, just remarkable runs that people could spend their whole careers chasing, and never catch. Yet, we have half a dozen of them happening every week. Nuclear company Oklo around $10 last year. It closed Friday at $127; D-Wave Quantum , roughly 90 cents last year, and now $32; Quantum play IONQ $9 to $73; Bloom Energy $10 to $90; and Joby , a flying car company, then at $5 and now at $18. I can think of a dozen of them that I would never have thought could amount to anything. And, there will be a dozen more I don’t even know. The market professionals have never seen anything like this. To them, every one of these stocks just seems like a wish, a dream, something smoke, something mirrors. But to the younger generation — and I say younger generation because almost no sizable money manager would embrace these money-losers — these are manna from heaven. They are winning, these buyers; they are geniuses, get out of the way. The only thing standing in their way is the moron establishment, but these buyers know they can always ” GameStop ” the establishment. And they are. They are. It’s so hard to believe that this moment is happening, one that the pros think has to end soon. But it doesn’t. When we saw a story Friday about an internal Army memo critical of Palantir citing fundamental security flaws, the stock of Palantir plunged $14 per share, even as Palantir said everything had been addressed to the Army’s satisfaction. I am sure the bears are licking their paws. Well, you better stop licking, because I bet by Monday the buyers will be back. No one is going to break ranks on this one. Not with its messianic CEO Alex Karp, and the big contracts it does keep winning. It does keep winning them. These stocks don’t have quit. There are not gigantic secondaries being launched as there were of this ilk in 2000-2001 when the dotcom bubble burst. There is no really big insiders selling. There are no negative analyst notes. Everybody believes. Even the people who should know better. Reason No. 2 : Nvidia . This is the greatest stock of all time. The king. It has exceeded expectation after expectation – and yet, it has more doubters than almost any major company I know. It sells at a multiple on future earnings out 18 months of just 28 times. Some say it must be that low because of the law of large numbers. Others say it’s because someone must catch them. Still others think that its customers are working on some secret project somewhere in the desert that will come up with a chip that is faster and can reason at a pace that even the best Nvidia has to offer can’t meet. But let’s step back for a second. There have been so many times when Nvidia CEO Jensen Huang has been doubted. So many times, his company’s stock has been belittled. If it were a software company, I don’t think the big hedge fund titans would hold it in such low regard. Little do they know, however, that Nvidia’s platform is loaded with software. It’s just so darned misunderstood; it does drive me crazy. Here’s what people should be thinking. We are living in the fourth industrial revolution. It is based on artificial intelligence that will carve up whole verticals. Meta Platforms CEO Mark Zuckerberg will use it to dominate the ad market. Alphabet’ s Google will use it to dominate the search market. Microsoft will use it to dominate the personal computer and enterprise software market. Tesla CEO Elon Musk will use it to dominate both the robotics market and the self-driving market, with Google’s Waymo chasing it. Apple will use it either by building it or being paid to come pre-loaded by one of the companies I just mentioned. OpenAI will use it to compete in all verticals but will have to pick its spots. That’s why it is spending so much money. The company has no choice but to do so. Amazon ? Many on Wall Street feel it is vulnerable because Amazon Web Services didn’t have the growth that was expected. It’s been in the doghouse ever since. I think it can’t be toppled, but I am feeling lonely at the no-so top. All these companies need Nvidia to keep their dominance. Amazon, which has developed its own chips, is thought to be a less productive place for new companies that need help, and that’s happening because they don’t have enough Nvidia at Anthropic, its associated company. They would rather go to OpenAI because Amazon Web Services is now looked down upon because it was built for retail. I personally think that’s nonsense, and I would never bet against Amazon. But the fact is if they bought more products from Nvidia, its stock would go higher. It adds up to the idea that perhaps Nvidia’s stock can go still higher. If you count it out, well, remember that vicious advertisement that ran in heavy rotation that talked about all the famous investors who sold their Nvidia, I don’t know, some 100 points ago? Remember how frightening that ad was. It was a doomsday ad that even had the guts to use my picture. Yep, Nvidia is the third leg of the stool that makes it so you look like a clown if you sell. That list of sellers? Welcome to the clown show. All of which is to say that true believers are in charge. The ones who are up so much that they think they can never be wrong. Bottom line: My advice is it remains a year of magical investing. Still, even when there is magic, the right thing to do is to take something off the table, even if you believe in magic. For many, it’s a once-in-a-lifetime run, and as painful as this is, you need to be mindful that they can always take a lot of it away. If a stock has gone up enough that you can take out your basis, do so. If you are up 100% ring the register on some. Not all. Some. That way, when the year of magical investing ends, you can say, “Not only did I make a fortune, I actually took off a fortune and let the rest run.” It’s a lesson I try to teach in my new book “How to Make Money in Any Market.” It’s a lesson that you can’t afford to ignore, even as you can’t think of a reason in the world why your stocks should come down. (Jim Cramer’s Charitable Trust is long NVDA, META, AMZN, MSFT. See here for a full list of the stocks.) 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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