CNBC’s Jim Cramer on Tuesday said that as stocks surged on the day, he’s looking for potential signs that the bear market rally becomes a genuine recovery in stock prices.
With the major indices each closing over 2.5% higher on Tuesday, Cramer said he heard plenty of skepticism that the markets would continue soaring rather than reverting back to sell-off mode in the coming days.
While he acknowledged the possibility of a resumption in stock declines, he said recoveries always start as bear market rallies before becoming something more. President Donald Trump’s assertion after the market close Tuesday that he won’t fire Federal Reserve chair Jerome Powell is already likely to catapult stocks higher on Wednesday, Cramer said.
“When you get this kind of rally, it doesn’t happen because someone gave you the green light to start buying,” Cramer said. “By the time there’s definitive proof, usually the rally’s been going on for a while.”
With that in mind, Cramer listed several potential indicators that the market recovery will sustain itself.
First, he said, there’s been much discussion about how the Dow Jones Industrial Average is headed for its worst April since 1932, one of the early years of the Great Depression. That rhetoric misses the fact that the Dow bottomed out that year before recovering through the rest of the decade, Cramer said.
Cramer also said that productive trade negotiations could turn around market sentiment for good. It only takes one country catering to Trump’s tariff-related demands, such as helping move manufacturing back to the U.S., to kickstart a wave of concessions, Cramer said.
A resolution with China would be especially helpful in avoiding more serious conflict, Cramer added, though he cautioned that Trump should be gracious rather than belligerent in his negotiations with President Xi Jinping.
If oil prices drop further, as they have for several months, that could also help boost U.S. stocks, Cramer said. A plummet in crude could spur the Federal Reserve to cut interest rates, he said, which would satisfy Trump’s vocal demands for a rate cut and resettle the bond market.
Other welcome signs for stocks would include soft economic data, which would also increase the odds of the Fed cutting rates, and more initial public offerings and mergers by corporations, Cramer said.
The odds of all of those factors going awry are low, Cramer said, so there’s reason for optimism.
“Sooner or later, somebody’s got to blink, all right? Doesn’t matter who. And when that happens, we’re going to be in much better shape,” Cramer said.
