CNBC's Jim Cramer on Thursday broke down why he thinks investors are being "disciplined" and the stock market continues to rise because of it, despite uncertainties surrounding the coronavirus outbreak.
Since the major indexes took a big plunge on Friday, the Dow Jones Industrial Average is now 520 points above its Thursday close. The S&P 500 is up almost 2%, and the Nasdaq Composite is up nearly 3% in that same period.
"Flow of funds can be a fickle way to invest, but right now the market is anything but mercurial or arbitrary," the "Mad Money" host said. "It's redoubtable. It's implacable. It's resolute. To buy on weakness isn't a stooge thing to do; it's the stooges who don't do the buying."
There are four reasons the market is going up, according to Cramer.
"Everybody knows this is the smartest, lowest-cost way to invest. You've got a diversified portfolio with some nice yield [and] big exposure to the largest companies in America," the host said. "It's not perfect. There will always be dogs [in the S&P], however when their performance is too doggy, too terrible, they can be kicked out and replaced by better companies."
While companies such as Nike, Disney, Starbucks and Apple, among many others with exposure to China, have warned that the outbreak will hurt business, Cramer said their balance sheets can help weather the pain. He added that the stocks may be "fabulous performers" after the coronavirus is contained, given that China has injected 560 billion yuan, or $83 billion, in its banks to stimulate its economy.
"In other words, investors are treating this slowdown as a buying opportunity for the stocks of American companies with major Chinese exposure, and it might just work," he said. "That's the second reason why you don't see many sellers. It would be very different if these companies had bad balance sheets."
With bond rates so low, the stock market is the only way that older, retiring investors can stay invested, Cramer said.
"We were supposed to have natural sellers that would weigh on the market every day. I'm talking, here, about the retiring baby boomers," he said. "You might have expected them to be ringing the register on a large part of their 401(k)s or IRAs at the beginning of this year because they've been up so long and the virus sure sounded scary."
President Donald Trump in Tuesday's State of the Union address trumpeted that the stock market has produced $12 trillion in wealth since he was elected to the high office in 2016.
"Whether you love Trump or you hate him, the president doesn't want to see this market go down. He's kind of like our money manager in chief," Cramer said.
"He sees the success of the stock market as being integral to his reelection efforts, and he wants to be reelected," he said. "If that means he's got to put his thumb on the scales to boost stocks, I bet he'll do it. That's a pretty good reason to buy the dips, isn't it?"
Disclosure: Cramer's charitable trust owns shares of Apple, Disney and Starbucks.