Jim Kramer: The stock market is on a slippery slope
On Wednesday, CNBC’s investment guru and TV host sounded the alarm when he said the stock market is slowly becoming a frothy market as investors buy up stocks while ignoring fundamentals..
«You won’t recognize this by the power-law averages … but it is starting to look a little like the market. Kenny Loggins, – he stated. – We are on the highway to the danger zone».
The comments appeared after a mixed trading session when the S&The P 500 closed lower for the second straight trading day and the Nasdaq Composite took a breather. Despite the fall in the S index&The P 500 is down 0.03% to 3909.88, the benchmark remains within six points of Monday’s record high. Hi-tech Nasdaq dropped 0.25% to close at 13,972.53 after making new highs last week.
Meanwhile, the Dow Jones Industrial Average climbed 62 points on Wednesday to hit 31,437.80, a new record, resuming its uptrend after breaking Tuesday’s six-day winning streak. The blue-chip index shows eight positive days in the last decade.
Jim Kramer said the market is showing signs that «people get too greedy», repeating the commonly used phrase that bull and bear investors make money, but pigs are slaughtered.
«In a frothy market, stocks will have huge rallies that are completely unrelated to underlying fundamentals, he said. – You have enough of these movements, and you need to clear something from the table, because when you pour yourself a beer, the foam does not hold».
Jim Cramer pointed to Specialty Acquisition Companies, or SPACs, cannabis stocks and short squeezes pumped up last month by Reddit investors as catalysts for high market valuations..
«So, you have to be careful when the situation gets so frothy, but, and this is very important, I am not saying leave now, ”he said. – I’m not saying sell everything. I’m just begging you to show some discipline and sell something, because no one has ever been hurt by making a profit.».
Kramer is not the only voice on Wall Street warning against inadequacy in the current situation. In a note published on Tuesday, a Bank of America analyst wrote that a market correction is on the horizon, in which the stock will fall by 10%..
Jared Woodard, an investment and ETF strategist at Bank of America, also attributed the possible slowdown in market activity and the disconnect between Wall Street and Main Street. He expects that if the market falls, it will open up new opportunities for investors..
«We expect a correction of 5–10% in the first quarter as “big unknowns” coincide with abundant positioning, record capital and earnings revision as good as possible», – reported Woodard.
According to Market Strategist Survey, CNBC research, Bank of America has set a target for S&P 500 at the end of the year – 3,800, which is significantly less than the average of 4,082 among analysts.
«You have to mow the hay when the sun is shining, I want you to. Just remember, stocks are ultimately sheets of paper. Wall Street will print these sheets of paper until buyers exhaust their firepower, at which point buyers are crushed by the roller, says Kramer. – We have not yet reached the goal, but if there is at least some conclusion from the foaming, we will certainly be heading in that direction.».