CNBC’s Jim Cramer reminded investors Monday of the forces that truly move the stock market.
“Stock prices don’t go down because people are in a bad mood,” Kramer said on “Mad Money.” “Companies go down because something goes wrong that affects the business and investors, big or small, tend to avoid something.”
Cramer said trading activity over the past 24 hours illustrates this point. After a weekend filled with political headlines, a continued rally in precious metals, and extreme snowstorms across large swaths of the United States, all three major U.S. indexes ended the day higher by the closing bell on Monday, even though they started with a sharp decline in S&P 500 futures on Sunday night.
Investors tend to treat Sunday night’s futures market, which opens at 6 p.m. ET, as a verdict on what will happen when regular trading begins Monday morning at 9:30 a.m. ET, but Cramer cautioned that it often rarely reflects reality and is a mass of anxiety.
“Ever since S&P futures began trading in the 1980s, I’ve seen Sunday night futures crashes so large that you’d think the stock market was going to fall rather than rise,” he said, adding, “They’re often an aggregation of all the fears of the weekend, nothing positive.”
Kramer said it will become clear as the week progresses that earnings season is currently the main driver for stock prices. That is especially true apple, microsoft and meta platform – Three members of the “Magnificent Seven” – all expected to report within the next few days. Microsoft and Meta will be announced Wednesday night, followed by Apple on Thursday. Cramer’s Charitable Trust, a portfolio used by the CNBC Investment Club, owns stock in all three companies.
While Mr. Kramer acknowledged the emotional weight of the national crisis, he argued that most major companies are not directly affected, and even when they are, the effects tend to be short-lived. Additionally, Kramer said businesses whose operations may have been disrupted by the weather, such as airlines that had to cancel flights or restaurants that lost customers because they didn’t want to drive in the snow, don’t have much influence over global events. S&P500.
Meanwhile, multi-trillion dollar tech giants have a lot of influence.
“It’s not that the S&P doesn’t respect everything that happened this weekend. It’s just that the Magnificent Seven, which is made up of 500 stocks and plays the biggest role in the index, doesn’t respond to sentiment at all.”
He added: “We are in earnings season, and as I write in How to Make Money in Any Market, earnings season is the time when stock prices most closely align with a company’s fundamentals.”
