The stock market had a strong start in 2021, after robust gains last year, despite the coronavirus pandemic. According to CNBC’s Jim Cramer, one reason for the continued rise in shares is simply the lack of people willing to sell.
“There are not enough stocks for everyone,” said Cramer in the “Squawk Box”. “The stock market is not divorced. The stock market is reflecting the strength of individual companies. There are 500 companies at S&P. Probably 400 of them are doing better than we thought” they would be during a pandemic.
On Thursday, the Dow Jones Industrial Average and the S&P 500 closed above 31,000 and 3,800, respectively, for the first time. Nasdaq also eclipsed 13,000 during the session, its maiden voyage above that level. The Dow Jones on Friday was basically flat, while the high-tech S&P 500 and Nasdaq rose early in the trading session.
Understanding the movements on Wall Street against the backdrop of a persistent pandemic, continued economic turmoil and turmoil in Washington may seem like a challenge to some people, Cramer acknowledged. “It’s a very strange and different time. Everything about that time doesn’t have a manual,” said the host of “Mad Money” later on CNBC.
“People come and talk about value versus growth. We like value in the morning, and the next day, every stock in growth was going up much more than value,” he said, referring to a generic scenario. “Is there a pattern here? Yes. People want to have shares and there is not enough stock. There just isn’t – not yet.”
Some prominent investors have raised concerns about the massive stock race since late March, when the coronavirus-induced liquidation hit rock bottom; the S&P 500 has risen about 70% since then. Carl Icahn issued a warning to Scott Wapner of CNBC earlier this week and indicated that he was protected accordingly.
“In my time, I saw a lot of wild highs with a lot of badly rated stocks, but there is one thing that they all have in common. Eventually, they hit a wall and undergo a big and painful correction. No one can predict when it will happen, but when that happens, look below, “said the billionaire investment titan on Monday.
The pandemic and its impact on the stock market created a different situation from the years before the dot-com crash, Cramer said. Highly speculative actions on the Internet helped boost Nasdaq by more than 500% from 1995 to March 2000, when the bubble burst.
“It’s not 1998 [or] 2000, “Cramer said of the current market boom during the pandemic.” If you open the economy, you will have the Disneys of the world flying. And as the economy remains closed, you have a lot of shares, the Amazons, flying. There are a lot of things flying around. “