The stock market is off to a strong start in 2021, after strong gains last year despite the coronavirus pandemic. According to CNBC’s Jim Cramer, one of the reasons for the stock’s continued surge is simply a lack of people willing to sell.
“There aren’t enough stocks to run around,” Cramer said on “Squawk Box.” “The stock market is not separate. 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” during a pandemic.
On Thursday, the Dow Jones Industrial Average and S&P 500 closed above 31,000 and 3,800, respectively. The Nasdaq also overshadowed 13,000 during the session, the first trip above that level. The Dow was almost flat on Friday, while the S&P 500 and the tech heavy Nasdaq rallied higher during early trading.
Understanding the movements on Wall Street against the backdrop of an ongoing pandemic, ongoing economic dislocation and unrest in Washington may seem like a challenge to some people, Cramer acknowledged. “It’s a very strange, different time. All about this time, there’s no playbook,” the host of “Mad Money” said later on CNBC.
“People talk about value versus growth. We liked value in the morning and the next day it was any growth stock much more than value,” he said, referring to a general scenario. “Is there a pattern here? Yes. People want to own stock and there isn’t enough stock. There just isn’t – yet.”
Some prominent investors have expressed concern about the massive rally in shares since late March, when the coronavirus-caused selloff hit rock bottom; the S&P 500 is up about 70% since then. Carl Icahn issued a warning to CNBC’s Scott Wapner earlier this week, indicating that he was covered accordingly.
“In my time I’ve seen a lot of wild rallies with a lot of mispriced stocks, but there is one thing they all have in common. Eventually they hit a wall and undergo a great painful correction. No one can predict when it will happen,” but if it does, look down, ”the billionaire investment titan said Monday.
The pandemic and its impact on the stock market created a different situation than the years leading up to the dot-com crash, Cramer said. Highly speculative Internet stocks led the Nasdaq to rise more than 500% from 1995 to March 2000, when the bubble burst.
“It’s not 1998 [or] 2000, “Cramer said of the current market rally during the pandemic.” If you open up the economy, then you have the Disneys of the world flying. And while the economy stays closed, you have a whole bunch of stocks, the Amazons, flying. Many things fly. “