The market rallied on Tuesday, with the Dow up about 100 points and the Nasdaq and S&P 500 climbing over 1% each. The move seemed to anticipate a Republican win in Massachusetts’ special Senate election, which would kill the Democrats’ filibuster-proof majority in the upper chamber and pause what Wall Street sees as an anti-business agenda.
In the Bay State, Republican State Senator Scott Brown had surged in many polls and seemed to hold the lead over Democratic State Attorney General Martha Coakley. But Massachusetts voters have until 8PM to make their choice, and that’s why Cramer today was a bit leery of the market’s run. Investors are assuming an upset, but there’s no guarantee of that yet.
“Brown better win,” Cramer said, “or else there’s no tomorrow” for this rally.
The implications of Brown’s victory are clear: the possible derailing of President Obama’s agenda, including health-care reform, cap and trade and the pro-labor “card check” legislation. Or, to put it simply, a potential move to smaller government.
“Which is what Wall Street wants,” Cramer said.
Cramer predicted a “one-day sigh of relief” rally if Brown takes the Senate seat formerly held by Ted Kennedy, but he also saw the chance for multiple expansion in the health-care sector. WellPoint , for example, once traded at 14 to 15 times earnings but had dropped to eight to nine during the health-care fight in Washington. But the Mad Money host started recommending the stock, thinking it would return to its previous multiple, after the legislative process had watered down the Democrats' intended reforms. A larger Republican presence in the Senate could boost this group even more.
The biggest effect of Tuesday’s election, though, will be the balance of power in Washington, which will tilt at least slightly back toward the Republicans if Brown wins. And that will change how the White House approaches its most important initiatives.
In other market news, Cramer pushed back against criticism of Citigroup’s earnings report on Tuesday, saying he thought the stock was a buy.
“The quarter was great,” Cramer said.
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