Important points
CNBC’s Jim Cramer said Tuesday that rising oil prices, interest rates and geopolitical uncertainty are calling for a more defensive approach to markets, even as many companies continue to post strong results. “We are not in an environment conducive to large capital gains, especially since September is historically the weakest month of the year,” the “Mad Money” host said. Stocks fell on the first trading day of September as inflation concerns drove up bond yields and raised questions about the U.S. Federal Reserve’s next move. West Texas Intermediate crude soared 5% to more than $90 a barrel after the U.S. military launched new strikes against Iranian targets near the Strait of Hormuz following attacks on two oil tankers on a key shipping route. Against this backdrop, Kramer said the charitable trusts, the portfolio used by CNBC’s investment club, are making three moves to reduce risk. The club increased its cash position to 15%, which Cramer called a “very high” level. A larger cash cushion protects you from further volatility, and it’s always good to have more dry powder on hand during times of volatility to take advantage of better buying opportunities. “We have such a goal because if we don’t truly end the war, we don’t know when the Iranians will provoke the president,” he said. The club is reducing its exposure to data center stocks and directing more funds toward health care. After cutting its stake last week, the company exited its remaining Corning position on Tuesday and also cut its Broadcom position last Monday to buy more Cardinal Health. Kramer said this change does not reflect a weakening of the fundamentals of AI. He pointed to Dell’s strong results Tuesday night as evidence that underlying demand remains strong. Instead, he said, data center stocks have faced increased pressure from rising interest rates and political opposition to new projects, while health care stocks have proven more resilient. “AI trading is very rough because of the macro context rather than the company-specific micro context,” Kramer said. “Micro is still strong, but it looks OK for now.” The club still owns Nvidia and Apple, but Cramer said it was difficult to ignore the persistent sell-off in the technology sector, especially after the group’s big gains. Kramer isn’t in a hurry to make any big buys for the club. He wants to see if investor sentiment becomes significantly negative before committing more money. “If everyone feels the same way we do, and we feel there are a lot more negative people than there are right now, we would be happy to leverage some of the trust’s funds,” Kramer said. “When oil and the president himself are in a volatile situation, and interest rates are volatile, you have to worry a little bit more about that volatility because this market is going to gravitate from positive to negative and push buying, especially around artificial intelligence, is not going to be rewarded.” Subscribe to the CNBC Investing Club today to follow Jim Cramer’s every move in the market. Questions about Cramer’s disclaimer? Call Cramer: 1-800-743-CNBC Want a deeper look into Cramer’s world? Punch him! Mad Money Twitter – Jim Cramer Twitter – Facebook – Instagram Have questions, comments, or suggestions about the Mad Money website? madcap@cnbc.com
