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On Tuesday, CNBC’s Jim Cramer commented on the notable rise in stock prices, expressing his interest in identifying whether this upswing signifies a true recovery rather than just a bear market rally.
As the main stock indices finished the day up by over 2.5%, Cramer noted a prevailing skepticism about the sustainability of this momentum, with many questioning if the markets would remain on an upward trajectory or revert to downturns shortly.
While he conceded that a downturn could still happen, Cramer emphasized that genuine recoveries often begin as bear market rallies before evolving into more sustained growth. He pointed out that President Donald Trump’s declaration late Tuesday, stating that he would not dismiss Federal Reserve Chair Jerome Powell, could potentially lead to additional stock price increases on Wednesday.
“Such rallies typically occur not because of a green light for buying, but rather because there’s been an underlying shift for a while,” Cramer explained. “By the time clear signs of recovery emerge, the rally has usually gained significant ground.”
To support his viewpoint about the potential for a sustained market recovery, Cramer outlined several indicators to watch for.
He first referenced discussions around the Dow Jones Industrial Average potentially facing its worst April since 1932, a pivotal year during the early Great Depression. Cramer argued that this conversation overlooks the fact that the Dow managed to hit a bottom that year before entering a prolonged recovery phase over the subsequent decade.
Furthermore, he indicated that favorable trade negotiations have the potential to significantly alter market dynamics. He suggested that should even one country respond positively to Trump’s tariff-related demands, such as incentivizing the return of manufacturing to the U.S., it might trigger a broader wave of concessions among other nations.
A resolution to ongoing tensions with China would be particularly beneficial, Cramer noted, although he advised that Trump should approach discussions with President Xi Jinping with a spirit of cooperation, rather than hostility.
Additionally, Cramer pointed out that a continued decline in oil prices could uplift U.S. stocks further. A significant drop in crude oil prices could motivate the Federal Reserve to lower interest rates, aligning with Trump’s calls for rate reductions and allowing the bond market to stabilize.
Other positive indicators for the stock market could include softer economic data, which would enhance the likelihood of the Fed enacting rate cuts, as well as an increase in initial public offerings and corporate mergers, Cramer highlighted.
Cramer concluded that the likelihood of all these scenarios playing out negatively is low, suggesting there remains ample reason for hope. “Sooner or later, someone has to make a decisive move. It doesn’t matter who it is, but once that occurs, we will find ourselves in a considerably improved situation,” he stated.
Jim Cramer’s Guide to Investing
Source
www.cnbc.com