Plenty of people are worried about the stock market’s seemingly endless rally, but CNBC’s Jim Cramer is more interested in the drivers behind it.
“Stocks have indeed come very far very fast, we’re right on the cusp of multiple rate hikes, there was a terrorist attack in Times Square, we’ve got a special prosecutor investigating the White House and last week we almost had a government shutdown that was only temporarily averted. Yet stocks [are] in great shape,” the “Mad Money” host said.
With some seasoned Wall Streeters calling a top to the action and warning investors to get out of the market now, Cramer found some tangible factors that could be responsible for the gains.
First on Cramer’s list was employment. High employment can have a positive effect on the economy, he said. Consumers buy homes, cars and expensive iPhones. Confidence rises.
Second, it’s important to look at the kinds of jobs being created, Cramer said. In November, the U.S. economy added 31,000 manufacturing jobs, a better gain than Cramer’s seen in years.
“The manufacturing sector [is] incredibly robust … because the United States now has found abundant natural resources that we tend to take for granted,” he said.
The sheer amount of energy, particularly renewable energy, in the United States has made the country a lead exporter of cheap crude oil, gasoline and liquefied natural gas.
Even though that wasn’t supposed to happen (OPEC’s cuts were meant to balance oil markets, not skew them in favor of the United States), Cramer said it’s brought huge benefits to U.S. oil producers.
Now, those companies are producing energy at lower costs, finding more oil with fewer rigs and are flush with business even at historically low oil prices.
“That’s why this rig count we follow on Friday and the oil inventories on Wednesday … really don’t matter that much anymore,” Cramer said. “We’re getting much more out of each rig. That matters. Who cares about storage when we’re exporting oil at a record pace?”
“In short, jobs are being distributed more broadly in places that had been fallow,” Cramer added.
Third, the GOP’s attempted overhaul of the U.S. tax code would bring benefits for businesses, particularly those that pay high taxes.
Corporate tax cuts would enable giants like Boeing, for example, to return more money to shareholders via dividends and buybacks and invest in their companies via hiring and research and development.
“We know they have far more plane orders than they can handle. They need to expand their capacity. Maybe they get the money to make that happen,” Cramer said. “Bullish.”
Fourth, the White House’s push for deregulation has breathed new life into small businesses, spurring hiring and increased confidence, the “Mad Money” host said.
“You may think this really bad, [but] I’m not talking politics. Purely from an economic standpoint, deregulation is good for the stock market,” Cramer said.
Paired with the comebacks in left-for-dead stocks like Valeant and the once-pronounced-dead retail cohort, Cramer said that the environment is just right for stocks to keep running.
“Last week, I did present a list of worries when we were hitting all-time highs again, like today, that I’m always ruminating on,” Cramer said. “But I think the reason why this market keeps hanging in there matters a lot more. The truth is, when the economy’s this good, you are indeed unlikely to get a sustained decline.”