Jim Cramer gave investors a reality check. He warned to never, ever, confuse the day-to-day actions of the stock market with the state of the real economy. As many saw in the horrendous decline on Monday, the market and the economy can vary drastically.
Cramer has survived eight separate crashes and countless bear markets in his investing lifetime. And he has always dreamed of the day that interest rates would be low, corporate balance sheets are strong, commodity costs are on the decline and employment is better.
So, if everything is so great, why the heck did the market go down on Monday? Cramer spelled it out.
The first issue is the indecisive leaders in the Federal Reserve. For example, St. Louis Federal Reserve President James Bullard made it clear on Friday that higher rates are definitely on the agenda of the Fed and said he is sanguine about everything that is happening right now.
The second issue is the damage that China has inflicted on the global economy. One year ago, the Shanghai Composite was at 2,200. On June 12 of this year it traded at 5,178. That is completely absurd to Cramer.
It is even more inconceivable that the Shanghai Composite has not repealed its entire gain, as it was built on tremendous account growth and loose requirements about borrowing on margin.
So, what should investors do?
Cramer recommended for those with cash on the sidelines for retirement, that it is a good idea to start investing that capital into the stock market. Do not invest all at once, though.
Looking back, this decline makes perfect sense to Cramer, even though it doesn't compute when looking at the real U.S. economy.