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Jim Cramer: Are Stock Market Bulls Too Hopeful?

Without hope, they say life has little meaning. But can the same be said for hope as an investment strategy?

Jim Cramer isn't sure. But he sees it playing out in the market right now.

"About a month ago both Schlumberger and General Electric sounded somewhat somber about their businesses," reminded the Mad Money host.

"However, after reporting earnings General Electric CEO, Jeff Immelt was brimming with confidence - talking about big orders and amazing prospects. Schlumberger, too, told a much better story," Cramer said.

Both stocks instantly reacted positively and both finished Friday's session among the day's biggest gainers. They were rewarded for no longer being pessimistic and instead being hopeful.

The same appears to be true for Morgan Stanley. "The brokerage reported a dynamite quarter and CEO James Gorman, while on Squawk Box, told a remarkable story of a turnaround with strong businesses and lots of belief that the future can be terrific," said Jim Cramer.

The stock vaulted higher on Friday, again rewarded for its hopefulness.

Caterpillar appears to be a similar story.

Shares popped on Friday after Piper Jaffrey upgraded the stock to 'Overweight' from 'Neutral' and raised the price target to $113 from $85.

"This one is almost totally about hope," Cramer mused, "hope that the market will look through the coming weak numbers and embrace the stock as a play on China's resurgence."

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Cramer also cited Intel gains as another instance of hope. "It's people hanging their hats on the hope that the second half of the year will be stronger globally - that the world's economies are going to get better," he said.

All told, it appears hope is abundant in the market – and that's exactly what's got Jim Cramer worried.

"Look, I certainly believe in hope. But in the end, if you are investing, I always say, hope should not be part of the equation. You can hope that the Ravens win on Sunday. But you cannot hope for better times and buy stocks because of that hope."

In other words, hope can drive the market too fast and too far. And if you buy into a market that's been driven by hope and not fundamentals, you may regret it.

"We need more facts to get more bullish from here," said Cramer.


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