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Cramer: Why Brussels didn't spook markets

Amid news of explosions in Belgium's capital on Tuesday, stocks were justifiably down at the open, but then rallied for most of the afternoon and pulled back shortly before the close.

Jim Cramer explained the action on the market, stating "We call it the underlying bid. That is a term that means buyers are lurking underneath current prices and when those prices drop, people start buying."

By the end of the day, the stocks affected were those directly related to travel and leisure as they will have the most have a loss of business. Cramer added that the rest of the market was able to mount a comeback because there has been an underlying bid since stocks bottomed in mid-February.

Why didn't the terrorist attacks create a greater lasting decline in the stock market?

"I think that these attacks have, sadly, become a kind of thing that we expect to happen. They are tragic and gut-wrenching, but are now accepted as part of the firmament," Cramer said.





People display the Belgian flag at Beursplein Square after Tuesday's attack in Brussels.
Alexander Koerner | Getty Images
People display the Belgian flag at Beursplein Square after Tuesday's attack in Brussels.

For those investors who have decided stocks currently present too great a risk, Cramer advised them to know their limits. The world is a risky place, and stocks carry risk. Cash does not, as with Treasury bonds, and he doesn't want anyone to add too much risk to their lives.

Instead, Cramer looked at stocks through a lens of calculated risk. He assessed stock risk by looking at what occurred in similar situations, whether it be in London, Madrid or New York.

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When tragedies occurred in those places, the concept of a roving bear market reappeared. Money shifted out of one sector and into another. Examples of a roving bear market are when oil plummeted after peaking in 2014, when China brought down the cyclical stocks in 2015 and when banks were taken down at the beginning of the year.

The last bear market persisting in 2016 is the health care group, and although the pressure is decreasing there, the sector isn't in the clear, yet. Cramer noted that both big pharma and fast-growing biotech stocks have reached levels where the sellers seem to have gone away.

Beyond that, Cramer noted that another event occurred to suggest stocks are undervalued currently. Tremendously negative commentary emerged from both Transocean and Schlumberger, with the companies stating that it could take years before things get better.

But these stocks barely budged; Cramer interpreted this as resilience.

The technology sector also displayed resilience; the group continued to climb though there hasn't been any big news lately.

"When you have groups that rally on no news that is a sign of money flowing in and a belief that the world is getting stronger, not weaker," Cramer said.

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