10 Positives to Battle a Downbeat Bernanke
The strong earnings reports the market had seen from Apple, Abbott Labs, United Tech and Coca-Cola, Cramer said Wednesday, were swept away by Ben Bernanke’s testimony before the Senate. The prognosis: not good.
“If you listened to Ben Bernanke’s testimony, you know Uncle Ben is worried,” Cramer said of the Federal Reserve chairman. “And when he’s worried, well, we have to be worried.”
Bernanke told Congress that the economic outlook looks “unusually uncertain,” The Associated Press reported. And for that reason, the Fed is ready to step in, if necessary, if the situation gets worse. Bernanke also reiterated his intention to keep interest rates low for an “extended period,” The AP said, in order to stimulate the economy. And while he doubts the US will suffer a double-dip recession, he did acknowledge that the economy right now is touch and go.
In spite of this, though, and in the face of an incredibly tough jobs situation that could further darken the outlook for the markets and the economy, Cramer said he saw reasons to stay positive. He found 10 things present now that weren’t on the table just four short weeks ago, and he thinks they should help balance out “the lousy jobs picture” and “the undertow of Bernanke’s remarks. Investors should keep these things in mind the next time stocks take a hit like they did on Wednesday.
1. The Chinese Communist Party’s exemplary display of capitalism, the successful soft landing of its overheated property market, has allowed other parts of its economy to take off again. That has boosted the minerals and minerals-related stocks like Freeport-McMoRan , Caterpillar and Deere , all of which closed in the green Wednesday despite Bernanke and his downbeat forecast.
2. Brazil right now is strong and it’s having a big impact on numerous companies, which augments the strength from China. So this country now must be taken into account when deciding on how well any of those companies are truly doing.
3. Europe is stabilizing. The Continent’s troubles haven’t shown up in the earnings we’ve seen so far, Cramer said, and the euro has found its footing. Plus, the bank stress tests there have given us more confidence in institutions like Banco Santander and Banco Bilbao .
4. Financial reform is done, and the bill is signed. The fine print of the bill had left the markets uncertain as the legislation’s effect on banks, and while it turned out to be bad for the investment banks, the regionals and financial-related names like Comerica , PNC Financial , State Street and Wells Fargo won’t feel a negative impact.
5. Gridlock in Washington, thanks to dissatisfaction with President Obama, is very good for stocks. Also, the only way for the Democrats to beat the Republicans in November’s midterm elections is by creating jobs, and that’s good for the markets, too. Gridlock could also serve to keep tax rates on dividends and capital gains low as well.
6. Ben Bernanke continues to keep interest rates low, and while housing isn’t great right now, it’s still better than it was. Another great point is that credit problems have peaked, as Bank of America , JPMorgan Chase and Wells Fargo have said. Oh, and those interest rates will stay low because there’s no inflation risk right now, and Bernanke today outlined all the things he can do to help the system if things get worse.
7. Not all of the companies reporting earnings are dead in the water, Cramer said. There are growth techs like Apple , strong-performing industrials like 3M and United Technologies and bull markets in both aerospace and trucks. See: great numbers from Eaton today.
8. Valuations are cheap, especially in relation to bonds. And with earnings estimates on the rise, Cramer thinks that price-to-earnings multiples for stocks are truly low, the lowest he’s seen in 30 years.
9. With sentiment this negative, there are still plenty of bears to convert to bulls. A lot of sellers who can become buyers, Cramer said.
10. The longer-term stock charts are about to get better, which matters a big deal to chartists and closet chartists alike. Last year’s big gains are about to drop off the charts, which will make what looks like topping instead appear to be basing, which is much more positive.
“None of these are the holy grail,” Cramer said, “and we know the market acts terribly, but it’s worth it to remember that we’re a whole lot better off now than we were just one month ago. And these points can offset the endless downbeat chatter … about joblessness.”
“Who knows how high we can go if we ever create a job in this country?” Cramer asked.
When this story published, Cramer’s charitable trust owned Abbott Labs, Apple, Bank of America and JPMorgan Chase.
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