Bullish in banking and industrials, smooth in tech
Don’t rely on tech stocks to outperform early in the second quarter, CNBC’s Jim Cramer warned on Wednesday.
“If you hope that the happy days are back for tech, I have some lukewarm news,” he told Mad Money. “As the second quarter begins, this market will be even friendlier to industry and … banks, and even less hospitable to technology and healthcare.”
Cramer highlighted Cleveland-Cliffs as a potential winner in the second quarter. The stock rose nearly 17% on Wednesday after the steelmaker released preliminary results that were much stronger than expected.
Cleveland-Cliffs is an example of companies producing numbers that attract money from large fund investors, Cramer said. These investors are also turning their backs on technology stocks like Amazon, Apple, Zscaler, and ServiceNow. The four tech names are down more than 5% this year.
“Money managers don’t care about the most exciting long-term growth stories … they want the companies that can offer the biggest surprises here,” said Cramer. “In a booming economy, this means owning boom-and-bust cyclicals like CLF, rather than the stocks of companies that may or may not represent future growth depending on the execution and execution of their competitors.”
The moves are part of reopening trade as optimism about economic recovery grows. Investors are diverting attention from last year’s games at home and remote working to companies that will have cheaper year-over-year comparisons in their business.
“Not only do industrials compare better year after year, you also have this inflation problem. … When the economy gains momentum, which tends to lead to higher inflation, inflation is fantastically devastating [growth] Company, “said Cramer.
“Your stocks will trade for potential returns five to ten years later, but inflation means these future dollars will have much less purchasing power and those gains will only be eroded.”
Cramer’s comments came after Wall Street closed the first quarter of 2021. The Dow Jones Industrial Average rose more than 7% at the start of the year. The S&P 500 and Nasdaq Composite gained 5.8% and 2.8%, respectively.
However, the Dow slipped 85 points on Wednesday. The S&P 500 rose 0.4% and the Nasdaq Composite rose 1.5% in what Cramer called a “counter-trend rally”.
Disclosure: Cramer’s charitable foundation owns shares in Amazon and Apple.
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