There is too much negativity about the stock market. Instead, focus on these three positives

ByVanessa

Oct 7, 2024 #Alibaba Group Holding Ltd, #Amazon.com Inc( t )DraftKings Inc, #Apple Inc, #Baidu Inc ( t)JD.Com Inc, #Business News, #CVS Health Corp, #Diamondback Energy Inc, #ETSY Inc, #Exxon Mobil Corp, #GE HealthCare Technologies Inc, #Investment Strategy, #JD.Com Inc, #Jim Cramer, #large image, #Latest News: Markets, #Markets, #Micron Technology Inc, #Nike Inc, #PDD Holdings Inc, #Procter & Gamble Co, #S&P 500 Index, #Walgreens Boots Alliance Inc, #Walmart Inc, #Wynn Resorts Ltd

There is too much negativity about the stock market. Instead, focus on these three positives

After all these years, after all the incredible rallies and gains by so many groups in the stock market, the typical morning still begins with a barrage of negativity. This gloom lasts until just before the close, where the market seems to say, “Well, maybe it's not so bad after all, at least for now.” And the selling ends an hour or two before the closing bell. It's amazing that incredibly important people get upset every day about things that the Federal Reserve did wrong, that presidential candidates made mistakes, or that our allies made mistakes. But you don't hear much about what companies are doing wrong, and we trade with companies – not name-calling or 25 or 50 basis point units. The environment is so good for business, but we somehow want to screw it up by talking endlessly about the Fed. I don't mind. I know I'm always looking for ideas. However, I find it so distracting that I think those who study the Fed have really lost track or are getting in their own way. They are not helpful and it is very easy to express an opinion because all you have to do is gossip or praise. Real homework is a burden. It's so much easier to predict what you think the Fed will do than to decide that Amazon might be done crashing, or that Micron's quarter really was better than expected, or that Walmart can rise even further. These decisions require homework, especially if you don't change your mind tomorrow. Friday's fabulous meeting is a reminder that the slower the central bank reacts, the better. The Fed-centric folks don't seem to understand how good this moment is. Once the Fed decides it's time to cut rates, you want measured, methodical rate cuts. Nothing hard. Nothing exciting. The longer and more extensive, the better. In that sense, Friday's strong employment numbers are a stroke of luck. The U.S. economy is services-based, and we want consumer attitudes to remain robust as the Fed lowers borrowing costs to more reasonable levels. The creation of 254,000 jobs in September is likely to contribute to this. Why is the market rising given all the negativity? The first reason is the offer. What's notable is that with the rate-cutting cycle in full swing and so many investors returning from summer vacation, there simply isn't much new supply coming online. We hear about OpenAI and its stellar $167 billion valuation, but don't see any stocks available to investors on the public market. We know Elon Musk is more politically active, but he's not offering us shares in SpaceX subsidiary Starlink, the satellite internet service that so many of us love. Meanwhile, buybacks continue at an insane pace. They will decline as third quarter earnings season begins, but demand is simply much stronger than supply. The offering isn't talked about much, but when my “Squawk on the Street” co-host Carl Quintanilla talks about the newly public companies ringing the opening bell, I'm aware that there's nothing of substance except occasionally – and excellent – spin-off. I have found that supply is the most powerful theme when it comes to the direction of the market. And right now we just don't have enough to live on. Every bit of money that comes out of shrinking money market funds and expiring U.S. Treasury bonds seems to be finding its way into stocks, be they small-cap stocks, mid-cap stocks – the new favorite – or the S&P 500. This is also due to this , that excess money is only available when inventories increase. If there are stocks that aren't participating, we have a second incentive: analyst upgrades. Think about it, the conversations are positive on almost everything except Nike, Walgreens, CVS Health, the cable companies (sigh) and maybe Etsy. I'm not kidding. When you look at the huge selection of stocks, you just can't find much worth hating. That wasn't the case a few weeks ago, before sentiment towards China changed – and that's our third positive point. We don't seem to understand how big this was. China has been the Achilles heel of this market for many companies – clothing companies; medical companies, including club holding company GE Healthcare; consumer goods companies; and casino companies like former club name Wynn Resorts. They were all in a downward spiral, with one analyst after another looking to lower the numbers. We lost this cohort of negativity when the Chinese Communist Party, faced with a decline in the MSCI index, decided to go all out with a variety of stimulus measures. This is something I didn't expect, even though one of my best mentors, hedge fund manager David Tepper, kept encouraging me to even send me GIFs and social media posts about “BABA black sheep,” a reference on the Alibaba stock ticker. I was angry with myself because I thought the Chinese government couldn't do anything about the country's failing stock market. I forgot the basic rule: the market there has absolutely nothing to do with the fundamentals. Sure, e-commerce and cloud giant Alibaba has actual fundamentals, including huge amounts of cash, but anything else going up is pretty wrong. BABA 3M Berg Alibaba's stock performance in the last three months. The money apparently flowing into China is a mix of international funds that are underweight China and are now worried about missing out on the upside, along with former tech money and DraftKings money – my definition of gambling. The Chinese stock market has recovered well since the stimulus announcements. But one day, not necessarily soon, the Chinese will run out of firepower. The best part about the newfound positivity toward China is that it has halted remaining analyst downgrades and price target reductions on U.S. stocks with heavy exposure to the country. One of the last companies to respond positively will be Apple, as the Chinese overhang is huge. Soon you'll hear that Chinese consumers are doing better and are buying an iPhone, helping to lengthen the purchase cycle. Although it hasn't happened yet, it seems to be an eventuality. It's incredible how optimistic this Chinese push is – and yet we tend to talk about it on Alibaba, Chinese electric vehicle makers, PDD Holdings, JD.com, Baidu and some Chinese players to be named later. The positive wave has not even reached our shores yet. Given that China was the world's biggest disadvantage, it is quite extraordinary that it was so surgically removed. I find it somewhat ridiculous that we spend so much time questioning the Fed and little time discussing these incredible positives. I say ridiculous because we act as if stocks have fallen sharply from their highs. Although we worked through the overbought state we were in, we didn't stumble too much as October began. The S&P 500 ended Friday's session just 0.2% below its all-time closing high set on September 30. Of course there are weaknesses. We saw the home builders clocking in on Friday. But you know that on Monday there will be half a dozen analysts screaming at the top of their lungs saying buy it. The real estate stocks that were so special will soon be special again. Sure, we had a spike in oil prices last week, but it caused few stocks to fall and many stocks to rise, including laggards like growth-oriented oil company Diamondback Energy and staid oil company Exxon Mobil. At some point they would have resulted in a zero-sum advance. Instead, they are now simply increasing. So why isn't it all too much? Why isn't it just Panglossian? This is actually a simple question. Set your alarm for 3:30 a.m. ET and watch how negative US stock futures are at that time. We have a groundhog-like bear that seems to magically appear when the sun comes up. The bear comes with all the trappings of intelligence and says critical things. Or hedge fund billionaires screaming about how miserable everything is. These brilliant critics make everyone nervous because they have the microphone and make good headlines. Negative stories keep the bull market from getting exposure in the media, but not among the buyers themselves. They have no choice but to look for things to buy. The worst thing that happens is that they pick an index – any index – and buy that. And yet the only people who don't seem to have a notable hatred of this market are the buyers. On the other hand, that's all that really matters. (Jim Cramer's Charitable Trust is Long AAPL and GEHC. See a full list of stocks here.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable foundation's portfolio. If Jim discussed a stock on CNBC television, he waits 72 hours after the trade alert is issued before executing the trade. THE INVESTING CLUB INFORMATION SET FORTH ABOVE IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. THERE ARE NO fiduciary duty or duty IN RECEIVING YOUR INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.

People walk in front of the New York Stock Exchange (NYSE) in New York City on September 13, 2024.

Spencer Platt | Getty Images

By Vanessa

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There is too much negativity about the stock market. Instead, focus on these three positives

ByVanessa

By Vanessa

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