CNBC’s Jim Cramer on Monday reminded investors about the forces that truly move the stock market.
“Stocks don’t go down because people are in a bad mood,” Cramer said on “Mad Money.” “They go down because something goes wrong that impacts their businesses, and that something tends to elude investors both big and small.”
The trading action over the past 24 hours illustrates this point, according to Cramer. It started with a sharp drop in S&P 500 futures on Sunday night, following a weekend filled with political headlines, continued spikes in precious metals, and extreme snowstorms across large swaths of the U.S. However, by the time Monday’s closing bell came around, all three major U.S. indexes finished the day higher.
Investors tend to treat the Sunday night futures market — which opens at 6 p.m. ET — as a verdict on what will happen when regular trading kicks off Monday morning at 9:30 a.m. ET, but Cramer warned it’s often a bundle of worries that rarely reflect reality.
“I have seen this Sunday night future plummet so many times in my career that you would think the stock market would be dramatically lower, not up, since the S&P futures started trading in the 1980s,” he said, adding “they often represent the sum of all of that weekend’s fears and nothing positive at all.”
As the week progresses, Cramer said it will become clear that earnings season is the main driver of stocks right now. That’s especially true with Apple, Microsoft and Meta Platforms – three members of the “Magnificent Seven” – all set to report in the coming days. Microsoft and Meta are due out Wednesday night, followed by Apple on Thursday. Cramer’s Charitable Trust, the portfolio used by the CNBC Investing Club, owns stakes in all three companies.
Cramer acknowledged the emotional weight of national crises but argued that most major companies aren’t directly impacted – and even if they are, it tends to be short-lived. Additionally, Cramer said companies that might’ve had their businesses disrupted by the weather – like airlines that had to cancel flights and restaurants that missed out on diners who didn’t want to drive in the snow – do not hold significant influence over the S&P 500.
The trillion-dollar tech giants, on the other hand, carry major sway.
“It’s not that the S&P doesn’t respect everything that happened this weekend. It’s that the S&P is made up of 500 stocks, and the stocks that play the largest role in the index, the Magnificent Seven, simply don’t react much at all to the emotions of the moment.
“We are in earnings season, and as I write in ‘How to Make Money in Any Market,’ earnings season is when stocks hew most closely to the fundamentals of the companies,” he added.
