Jim Cramer says it is time to talk about the lack of institutional memory on Wall Street.
"There is almost a whole generation of young money managers out there who have only ever experienced central bank intervention as a positive for the stock market. Call them the quantitative easing generation," the "Mad Money" host said.
These younger professionals believe that when the Federal Reserve keeps interest rates down, it makes certain stocks more attractive than they would be normally. Thus, they think that the Fed raising rates will put a damper on stocks.
Cramer gets that argument. It's easy for him to see how investors would believe that the market could take a hit from higher rates.
What younger professionals don't know is the experience Cramer saw with his own two eyes over the span of 35 years on Wall Street — that the stock market can still make big moves higher, even if the Fed raises rates.
"I want to turn the central bank as a prop thesis on its head … We have been afraid of higher rates for six years and that fright, coupled with the worries in Washington, has made stocks an untenable investment class for a vast number of people," Cramer said.
The worries in Washington were most important to Cramer. For many years, because of gridlock, nothing could get done, and therefore the Federal Reserve had to step up.
"I think that this recent rally isn't just about Trump. It is based on the presumption that the gridlock has finally been busted in a way that is positive for investors," Cramer said.
Cramer thinks President-elect Donald Trump is perceived as a man who wants people to have more money in their pocket to invest, whether that means starting a business, owning stocks or buying real estate.
That means money will roll into stocks and out of bonds, because investors are less afraid that Washington will hurt their portfolios with a debt ceiling crisis or tax stalemate. They want to own stocks because they think the government can get things done and the new president will push for lower taxes.
Thus, the economy may be able to breathe on its own, rather than relying on lower rates from the Fed. And that is what is powering the stock market rally, Cramer said.
"Whether you love Donald Trump or hate him, he wants to cut regulation that hurts earnings, he wants to put more money in your pocket that ends up in the stock market, and he wants to build things that increase orders for equipment, leading to more people working in higher paid jobs," Cramer said.
Trump could be erratic and post errant tweets that hurt stocks, and he could fail to do all of these things.
But he could also break up the gridlock in Washington, which means the Fed won't need to boost the economy or the stock market.