“There aren’t sufficient shares to get round” – Cramer says this can be a key issue out there rally
The stock market got off to a strong start in 2021, having risen sharply last year despite the coronavirus pandemic. According to CNBC’s Jim Cramer, one reason stocks have continued to rally is simply the lack of willingness to sell.
“There aren’t enough stocks to get around,” Cramer said on Squawk Box. “The stock market is not divorced. The stock market reflects the strength of individual companies. There are 500 companies in the S&P. Probably 400 of them are doing better than we thought,” which is what they would do during a pandemic.
On Thursday, the Dow Jones Industrial Average and S&P 500 closed above 31,000 and 3,800 respectively for the first time. The Nasdaq also surpassed 13,000 during the session, its maiden voyage above that level. Friday’s Dow was essentially flat while the S&P 500 and tech-heavy Nasdaq rose higher in early trading.
Cramer acknowledged that understanding the movements on Wall Street could be challenging for some people against the backdrop of an ongoing pandemic, economic disruption, and turmoil in Washington. “It’s a very strange, different time. There is no playbook at this time,” said the Mad Money host later on CNBC.
“People come and talk about value versus growth. We liked the value in the morning and the next day it was each and every growth stock that rose much more than the value,” he said, citing a generic scenario. “Is there a pattern here? Yes. People want to own stocks and there aren’t enough stocks. There just isn’t – yet.”
Some prominent investors have raised concerns about the massive surge in stocks since late March, when the coronavirus sell-off bottomed out. The S&P 500 has risen around 70% since then. Carl Icahn warned CNBC’s Scott Wapner earlier this week, stating that he was appropriately covered.
“In my day I’ve seen a lot of wild rallies with lots of mispriced stocks, but they all have one thing in common. Eventually they hit a wall and go into painful correction. Nobody can predict when this will happen, but when that happens, take a look below, “billionaire investment titan said on Monday.
The pandemic and its impact on the stock market created a different situation than it did in the years before the dotcom crash, Cramer said. Highly speculative internet stocks helped the Nasdaq rise more than 500% from 1995 to March 2000, when the bubble burst.
“It’s not 1998 [or] 2000, “said Cramer of the current market rally during the pandemic.” When you open up the economy, the world’s Disneys fly. And with the economy closed, quite a few stocks, the Amazons, are flying. A lot of things fly. “