Is the Fiscal 'Day of Reckoning' Coming?

When is the fiscal “day of reckoning” coming?

Jim Cramer

Jim Cramer said he’s asked that question more than anything else lately. After all, many investors don’t believe in the stock market’s rally and think it will eventually lose any gains.

(Read More: Bob Woodward: 'Day of Reckoning' Is Coming)

In Cramer’s opinion, however, the “day of reckoning” isn't likely to come any time soon. To support his argument, the “Mad Money” host noted the considerable progress toward solving Europe’s sovereign debt crisis.

“We finally have responsible policymakers running the most important countries, Italy and Spain, and we have a central banker who’s been able to convince the rich countries in Europe to back the poorer ones,” Cramer said. “At the same time, safeguards have been put in place to buy the sovereign bonds of the most troubled nations, which has led to one of the greatest stock market rallies ever, led by the banks of all regions. There’s now money galore where there used to be no liquidity.”

Meanwhile, Cramer argued that while China’s economy is problematic, the market no longer worries whether it’s on a verge of an economic collapse that would take down the world’s economies. Cramer noted that the country has plenty of cash on the balance sheet to solve its problems.

(Related: Why the US-China Trade Spat Is Just Political Posturing.)

In the United States, the possibility of the “fiscal cliff” still looms, but Cramer said policymakers are in control of the situation. Lawmakers have the power to deal with this problem in some fashion, which is why Cramer thinks the market has continued to rally lately despite the possibility of this looming trouble.

(See: Bernanke Briefs US Lawmakers On 'Fiscal Cliff')

All things considered, Cramer thinks the aforementioned concerns are troubling, if not a reason “not to get complacent.” But as far as Cramer can tell, the concerns in the market today don’t add up to a “day of reckoning.”

“We’ve got some big worries, and they can produce some big percentage declines if they go wrong,” Cramer said. “But these issues represent price risk to stocks — not systemic risk to the world of finance — and that’s why I don’t think the next reckoning beckons any time soon.”

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