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Cramer: Republican victory adds up in the market

Personal politics aside, Jim Cramer only cares about what Tuesday's elections mean to the market. With the vast array of executives that the "Mad Money" host speaks to on a daily basis, he knows that they are happy about the election results.

What does this mean for the market? Certainty.

Ultimately, people will be willing to pay for more future earnings, because they crave certainty. They just got it in the form of a pro-business Congress and a checkmated president.

Executives will now be willing to take on more risk for their companies, which Cramer translates into more business formation, more growth and more new borrowings.

"That, in a nutshell, is great for the U.S. economy and fabulous for our stock market," said Cramer.




U.S. Senate Minority Leader Mitch McConnell (R-KY) addresses supporters at his midterm election night victory rally in Louisville, Kentucky, November 4, 2014.
Shannon Stapleton | Reuters
U.S. Senate Minority Leader Mitch McConnell (R-KY) addresses supporters at his midterm election night victory rally in Louisville, Kentucky, November 4, 2014.

Rather than jump in and start giving stock recommendations like he usually does, Cramer prefers to review the pros and cons of the election and what this means for money in investors' pocket.

This means that Washington gridlock is back. That's a good thing, because investors can focus on sales, profits and growth of companies.

"They made real nice on TV on Tuesday, but let's face it: Republican Congress hates the president, and the president hates the new Congress even more than the old one; it's a perfect formula for getting nothing done."

When Cramer looked at the Republican candidate winners, he didn't see crazy radicals. He saw people who are mainstream politicians. Mainstreamers don't want to alienate their business supporters, which could result in a small deal in the form of a corporate tax reduction for next year.

There are a few specific companies that will benefit from the elections. With defense budgets on a roller coaster headed back up, Lockheed Martin will be unstoppable. This is also good for General Dynamics and Northrop Grumman.

However, Cramer warns that investors should be careful of mall-based stores. Especially since Michael Kors blamed sluggish mall traffic for their low numbers.

"That means even more buying of perceived non-mall stores: Costco, Ross, TJX, and yes, Wal-Mart, which can't seem to quit going higher even though it's universally reviled as the last place people want to shop, despite the fact that 100 million people shop there every week," added Cramer.

In the end, Cramer doesn't think the elections indicate to investors whether they should start buying or selling; it's a question of what to buy. Buyers will pay more for companies with good earnings. And companies that see their earnings estimates fall will require a lot more help than just from a Republican Congress.



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