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Is the Market Doomed to Repeat 2011?

Monday, 30 Jan 2012 | 6:14 PM ET

As U.S. stocks closed down on concerns over the European debt crisis, Cramer on Monday wondered whether the market is bound to repeat last year’s trajectory.

In 2011, the market “took off like a bat out of hell” until running into a bear market. Most every sector suffered on fears that Europe’s sovereign debt crisis might spread. In a similar fashion, stocks took off with great gusto in 2012 until recently selling off. While it’s reasonable to think the market might be repeating itself, Cramer doesn’t think investors should jump to that conclusion just yet.

To illustrate his point, Cramer compared the world to a four-legged stool with the United States, Europe, China and the emerging markets represented by a single leg.

“At the beginning of last year, the U.S. was doing nothing at all, dead in the water,” Cramer explained. “Europe was doing well enough for their central bank to raise rates twice, or at least, the central bankers thought things were going well enough. China, meanwhile, had to slam on the brakes to cool off an overheated property market. And the emerging markets, from Brazil to India, had to raise interest rates as well, to break the back of inflation.

“In short, at the beginning of last year, one leg of the stool was wobbly—us—and the other three got chopped off. “

Today, European leaders are dealing with the debt crisis. Cramer thinks the European Central Bank has begun put through a rate cut, thereby creating a lifeline for banks that has allowed some progress to be made. Meanwhile, the U.S. has enjoyed some growth, including in oil and gas, auto and housing. Cramer had hoped China would end its slowdown and step on the accelerator, but it seems to be simply "tapping on the brakes." Finally, he noted the emerging markets are cutting rates and showing some positive signs.

“Add it all up and what we see is a mixed picture with Europe falling, maybe falling hard, the U.S. slowly getting better, the emerging markets struggling to improve and China moving along not strong enough to ignite inflation, but also not strong enough to be the world’s engine for growth,” Cramer said, adding that the bears may use Portugal’s debt troubles to curb any enthusiasm. “But will we fall down the 2011 rabbit hole? I think it’s more likely that we do very little while we work off the overbought position that’s plagued us since the year began.”

Nevertheless, he thinks several cycles will keep roaring, including aerospace, autos and housing.

Read on for Cramer's Plays on a Potential Housing Rebound

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