Jim Cramer, the manic presenter of the Mad Money show on CNBC, and founder of TheStreet.com, is bullish. The Dow Jones and the S&P 500 are making record highs, he notes, and if you look at the charts of most major stocks, “you will see an explosion of direction changes”, due to “short sellers covering positions that have gone awry”. This is partly because a more optimistic view of economic growth is taking hold in the US, as investors grow less concerned about the Federal Reserve crushing the rally.
Another factor is the appearance of “major reversals” in various sectors. For example, up until a few weeks ago, everyone believed we had reached “peak car” and that demand was set to fall. However, “Hurricane Harvey has destroyed huge numbers of insured cars which will need to be replaced”. Similarly, the devastation of Hurricane Irma will boost construction companies at a time when many people felt that “the housing cycle was finished”. Higher interest rates should also help banks.
Of course, “stock charts can be wrong”. However, even if they prove to be misleading about the fundamentals, they can end up being “self-fulfilling” anyway, because “they allow analysts to come out of their foxholes and make bullish calls”. Cramer admits that not all sectors have risen, with some leading technology names, including Facebook, Apple and Google, slipping back. But this is because “money is moving out to other sectors and there hasn’t been any major news to drive them higher”. Overall, when “facts and directions change, you have to change with them” and so it’s likely that “this bull market has longer to run”.