This Election Could Buck Historic Market Trend
Web Editor, "Mad Money"
A year after every midterm election since World War II, said Bespoke Investment Group’s Paul Hickey during Tuesday’s “Street Signs,” the markets have been up an average of 15 percent. It’s the kind of stat that investors might take comfort in, for sure—but they shouldn’t.
While that number may sound “amazing,” Cramer said, each election needs to be analyzed individually. In 1998, the Federal Reserve was dramatically cutting rates, and that was a key driver for the markets. But in 2010, the Fed is fighting the threats of both deflation and hyperinflation.
“We haven’t seen that in the previous midterm elections,” Cramer said. “So I don’t want to get carried away with that because it gives you a false sense of security.”
The “Mad Money” host expects gridlock in Washington, with the Republicans controlling at least the House, to neutralize any problems DC may pose to the markets. That leaves corporate earnings and actions from the Fed to catalyze stocks going forward, and it’s an inherently different situation than others we’ve seen before.
“I don’t want to take stock in what’s happened historically,” Cramer said. “I want to take stock in what’s happening now because it tends to make me more money.”
Cramer warned investors to steer clear of Pfizer , which he called a “value trap.” The loss of patent protection for some of the company’s key drugs pokes too deep a whole into its earnings, and right now the market wants only earnings momentum and raised guidance.
For that, investors should consider the HMOs—Humana , Unitedhealth and WellPoint . Despite the massive debate over health-care reform, which President Obama hoped would rein in these companies, somehow they have still managed to come out on top.
“Even though that seems very counterintuitive and not what the president might have wanted,” Cramer said, “they’re the winners.”
General Motors may have a big problem on its hands, considering it holds 531,000 pensioners and 85,000 current employees on its books. But Cramer thinks that matters little to the company’s coming IPO.
“If a deal’s priced right,” Cramer said, “I don’t care if they have a million ex-employees.”
Call Cramer: 1-800-743-CNBC
Questions for Cramer? firstname.lastname@example.org
Questions, comments, suggestions for the Mad Money website? email@example.com