After President Donald Trump disbanded his strategic and manufacturing councils as top CEOs denounced his reaction to the fatal violence at a Charlottesville, Virginia, protest, Jim Cramer expected the stock market to collapse.
But it didn’t.
“What matters is that sales and profits have been excellent this year, particularly for everything but select retailers and the oil and gas industry. On top of that, low interest rates and slow inflation have combined to make those sales and profits worth more than most investors expected,” the “Mad Money” host said.
And while Cramer hates talking politics, he acknowledged that the new administration’s inaction has somehow paved the way for U.S. businesses to keep making money hand over fist.
“The reason? Listen, you need to understand that the business world is made up of cycles,” he said. “There are all sorts of cycles. There’s the housing cycle, the consumer spend cycle, the auto cycle, the tech spend cycle, the non-residential construction cycle, the truck build cycle, the oil and gas cycle, the mineral cycle, the aircraft cycle… a lot of cycles.”
And unless you’re watching auto sales, which are peaking, but at a fairly high level, Cramer said you’d be hard-pressed to find any of those cycles in a bad place at the moment.
Cramer said a lot of this widespread success has to do with demand. For example, in the housing sector, there’s more demand for housing than there are homes going up in value.
“Think of everything that goes into your house,” Cramer said. “Housing is a 10-percent part of the economy, but because of all of the accouterments both outside and inside, plus all of the financial and legal ramifications of buying a home, it punches way above its weight.”
The “Mad Money” host sees huge demand in the aerospace sector, too, with big players like Boeing ramping up production and topping earnings estimates.
Top technology companies’ products are also in high demand, but most investors (Cramer included) see the tech cohort as secular, not cyclical.
“Remember, if something’s a cycle, that means it booms and busts. If it’s secular, that means a sustained boom,” Cramer said. “If you think the growth in cellphones, the internet of things and artificial intelligence are secular, as I do, then there are a ton of stocks worth buying here. The disbanding of Trump’s manufacturing council doesn’t mean a thing to any of those cycles.”
If anything, Trump’s rift with business leaders could be a boon to some companies that are worried about being eviscerated by a tweet from the president.
The U.S. dollar has also weakened recently, benefiting U.S.-based companies with international business by making foreign earnings translate into more dollars stateside.
“If you want to evaluate the stock market, you need to look at businesses as the sum total of the prospects of their sales and earnings and look at them through the lens of what you’d pay for those numbers, based on the price of money — interest rates and inflation,” Cramer explained. “Beyond that, we can get all geopolitical, we can get mired down by the madhouse in Washington, but never forget that the four walls of the spreadsheet are far more powerful in this room than the four walls of the White House.”