Goodbye, Fed rally days, and hello, economic growth days!
Jim Cramer is jumping for joy that the market is no longer reliant on the Fed to rally, and he's happy that some good, old fashioned growth and profits are finally doing the heavy lifting.
On Tuesday, all three major U.S. indices were yet again on pace for their best quarterly gains of the year, and were spurred further amazing 3.9 percent gross domestic product growth for the third quarter. That is the fastest growth the U.S. has seen in 10 years, and it gave the market a solid reason for rallying, leaving those Fed-reliant stocks in the dust.
"This market's backed by the full faith and credit of higher profits and better growth than we thought. It is spurred on by the consumer spending more money, something that the gross domestic product of this country, which is 70 percent consumer driven, totally affirms," Cramer added. "It is spurred by a sense of security, wealth and improvement that is making people more confident."
More confidence can be translated into more houses being built, more businesses starting up, and more hiring in our future—all good things.
Some may counter Cramer's claim that this isn't a Fed-fueled rally. However, without the bond buying program churning, how could the Fed inspire the boost?
"That is why I have said for years, 'Do not listen to these Fed talkers.' They either don't understand the stock market, or are motivated by greed," the "Mad Money" host said.
Typically, when the economy has a 3.9 percent growth rate, we would then see higher interest rates. But have no fear, Cramer thinks that is not going to happen for three reasons:
First, the rest of the world is not doing well. Second, there is very little wage inflation. Third, there is very little commodity inflation.
Countries like Italy and Spain have lower interest rates than the U.S. and Cramer says they are not to be trusted. Though the U.S. does have higher employment, we do not have higher wages, and there are still plenty of people looking for work, according to recent data. And commodity inflation? Energy is at a four-year low, and everyone on the planet is talking about low oil prices.
"I have been investing in the stock market since 1979. The best parts of whatever rallies we have had come when we have just the kind of acceleration in earnings that this gross domestic product number would imply. This makes sense," Cramer said.
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So before investors start to worry that the market is too high, and that good news is bad news because the Fed will tighten: Think twice.
The Fed is no longer the deciding point. Growth and profits are, and those are things that our country has right now and the other countries do not. Sometimes, that is all you need to know to make a case for the bulls.
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