Want to know what’s next for the economy if the U.S.-Iran war continues? CNBC’s Jim Cramer said Tuesday’s stock market moves gave investors a warning.
Despite making a small profit at the last minute, S&P500 As the deadline for President Donald Trump to cut a deal with Iran and reopen the Strait of Hormuz approached, the session remained sluggish for much of the session with little sign of progress and hopes for a solution between the two countries waned. President Trump has threatened to destroy Iranian bridges and power plants if a deal is not reached by 8pm ET on Tuesday. of Dow Jones Industrial Average 0.2% reduction, Nasdaq Composite Ended the day with just 0.1%
The “Mad Money” host said there was “a lot of bad news” during the session, citing “consumer weakness coupled with inflation.” “Personally, I hope things calm down because if the president takes a medieval approach to Iran, it will do incredible damage to the world (and) our economy. The stock market is telling us that.”
Kramer’s reasoning: Look at the performance of four sectors of the market on Tuesday.
First, he cited retail stocks as the “real shoutout.”
walmartThe 3.3% decline in retail stores shows that even budget-conscious department store chains can become too expensive for many people to shop during economic downturns caused by overseas conflicts.
Still, Kramer praised Walmart’s overall business. “This is a stock that really describes the term juggernaut. It’s a value-oriented retailer that has started to attract affluent customers from all over the world who make more than $100,000 a year, but that’s where people who aren’t wealthy buy much of their food and clothing anyway,” he said. “Walmart was a complete runaway train that left many other retailers behind. But today? Walmart is saying something different.”
shares of dollar general and dollar tree They also decreased by 2.6% and 4.2%, respectively. Usually, when the economy is slowing down, discount stores are the winners. But Cramer said the weakness in both stocks shows that consumer health may be hit harder than expected. “At least one of these should have been more positive,” he added. “It’s just a problem, and it bodes badly for tens of millions of people in this country.”
Then there were cruise line stocks. “No one is holding back,” Kramer said. royal caribbean It fell nearly 3% on Tuesday, but norwegian It fell 3.3%. carnival There was a similar loss of 2.96%.
“Since COVID-19, we know that many people have adopted the mantra that ‘money is long and time is short,’” Kramer said. That means they’re taking a record number of vacations. Is that still the case? He continued, “Cruise lines are a bargain and have shown incredible success coming out of the pandemic, so look to cruise lines to find the answer.”
capital oneThe 1.6% decline gave investors a glimpse of the quality of credit if the war continues, Cramer said. The credit card giant has many subprime and near-prime borrowers, who could struggle to pay high interest rates if the economy worsens. Capital One is also a holding in Cramer’s Charitable Trust, a portfolio managed by CNBC Investing Club.
Cramer said the poor performance of three groups – retailers, cruise lines and credit card issuers – shows “real weakness” for consumers. He added: “Instead of getting better, it’s actually getting worse.”
Finally, losses in another sector highlight inflation concerns.
Kramer pointed to the decline in drug names. Merck It fell 1.3% on Tuesday, but pfizer down 2.6%, AbbVie 0.2% reduction. “(These things) tell us that not only are things slowing down, but inflation is also picking up,” Cramer said. “When we know inflation is likely to run rampant, the group that does the worst is drug stocks.”
Overall, it’s a grim vision that Tuesday’s session painted for the economy. But Kramer said it hasn’t been finalized yet because there’s still a lot of uncertainty regarding the war.
“The bottom line is that stocks, like hips, don’t lie,” he added. “Of course, the scenario that is likely to occur… can be easily reversed.”
