CNBC’s Jim Cramer said Wednesday that Wall Street is finally catching up to his long-held belief that the market has been bullish since inflation peaked last year. Regardless, he laid out several possible factors that he said could “slay the bull.”
“Now, I don’t know how many of these negatives would have to surface to slaughter the bull,” Cramer said. “But they’re possibilities.”
Cramer pointed first to inflation as one factor that could really squash a bull market. Next year’s new infrastructure jobs could trigger a bout of wage inflation, and the Federal Reserve could continue to tighten rates, he said.
“If short rates get high enough, money will indeed flow out of this market like water, and they aren’t that far from being that way,” Cramer said. “I mean, look, I doubt it’ll be necessary for the Fed to take them up so high, but, well, it would easily slaughter the bull, and the Fed could do that.”
He also noted that, of course, a full-blow recession could spell market disaster. But he said he sees imminent recession as an unlikely outcome due in part to big banks’ recent positive earnings reports, low unemployment levels and consumers on average having more cash than they did just a few years ago.
Froth could also be hazardous to a bull market, especially when it comes to artificial intelligence, Cramer said, with investors throwing money at any company touting innovative artificial intelligence products.
Earnings season isn’t over, he added, and it is possible that key players, such as Cramer’s “Magnificent Seven,” i.e., the tech giants currently leading the market, won’t perform as well as expected.
Cramer highlighted geopolitical events that also have the capacity to bring the market down, such as tensions escalating between China and Taiwan or new developments in Russia’s ongoing war with Ukraine.
“There’s enough money still betting on a recession or sitting on the sidelines in short-term Treasurys, that I think this bull can still have forward momentum,” Cramer said. “Sure, something could go badly wrong, but for the moment, I think we’re too early into this move for it to end anytime soon. So many investors are only just waking up right now to the fact that a bull market even exists, which makes it mighty hard to conjure up a serious bear thesis.”
