I see this year’s budding stock rally signaling a different kind of bull market, one that’s not so reliant on just a few stocks

Best News And Media AffiliatesJan 29, 2023 5:27 pm

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This nascent bull market started with the peak in interest rates and the dollar back in the fall and then broadened to include bank and semiconductor stocks in 2023. Is it fragile? Is it alchemy? Is it real? We’ll know after we see the quarterly earnings this week from the likes of Club holdings Apple (AAPL), Meta Platforms (META) Alphabet (GOOGL) and Amazon (AMZN), as well as what the Federal Reserve decides at its two-day meeting ending Wednesday and what the monthly nonfarm payroll numbers show Friday. I’m not as concerned as I would normally be though because the critics right now feel like poor picadors to me who would never catch a bull, let alone a matador who would put an end to things. Here’s why: Much if not most of the investing public and the money managers entrusted with their assets stopped believing in this market a long time ago when the Fed let things get out of control for a year because it feared a resurgent Covid. Public health was none of its business but it became its business and it did the best it could do. The revulsion that managers and investors feel started with the free money that then-President Donald Trump gave out, which somehow, got invested in a lot junk. That started a brutal pace of illegitimacy. It was followed up with the wrath of tech and the trillionaire sell-off of FANG and Friends, one that ultimately led to the end of FANG. That’s right we created FANG a decade ago this week on “Mad Money,” and it was a really good call — until it wasn’t. Facebook, now Meta, peaked ages ago and seems almost unimportant. Amazon got so bloated during the pandemic that it must be rightsized or its earnings won’t entitle it to be a growth stock. Netflix (NFLX) was the best of the lot, but your money turned into a pillar of salt if you looked at it at any time since November 2021, the month of the tech-heavy Nasdaq ‘s record high. You could say that about all of the FANG and friends names, including Google, now Alphabet. Apple held up a little longer and didn’t peak until early January 2022 along with the broader market. Oh, and why not include Tesla (TLSA) in the bunch; it deserved its trillionaire-cursed fate. Microsoft (MSFT) and Tesla reported and they appear to be non-events, which is rather incredible when you consider that Microsoft’s forecast came down quite a bit because of the Azure cloud nonetheless, the putative gem of its web services business, and Tesla actually lowered the price of its vehicles, something never thought possible. When Amy Hood, CFO of Club holding Microsoft, dropped the hammer during the post-earnings conference call it looked over. When Elon Musk succumbed to competition, it looked dead. Yet, take a look: Both had excellent weeks. It didn’t matter. It could be the same for Alphabet, Amazon, Apple and Meta this week. That’s important. However, far more important is the lassitude with which we accepted these numbers. There was, indeed, an instant tsunami of selling after Hood dropped Microsoft’s bomb. Tesla’s stock had been going down for months. Other than the media did anyone care? The world is so worn out of fear for these, and the ennui for FANG and friends has transcended fear and gloom. We just don’t care anymore. The Fed? It could surprise us with a 50-basis-points interest rate hike this week. That would be poorly received initially but even that could be swallowed IF accompanied by a simple “done for now” statement. It’s worth noting that the market has over 98% odds on a 25-basis-point increase, according to the CME’s FedWatch tool . There’s even a slim contingent that sees a chance of no action. The nonfarm payroll report? We need to see decent wage-price stabilization — and given the layoffs we have seen — if we don’t get one, we will simply say it’s a matter of time. I know that these words sound like a derisking of the market. But that would be so wrong it’s painful. A decade after FANG what matters is everything else: the ascendancy of American businesses as a whole and all of those broadening bull markets. For example, Boeing (BA) rallied despite the FAA outage, and web stocks rallied despite Azure’s softness. Housing stocks held in because the demand for housing is demographically based and mortgage rates have stabilized, thanks to the inverted yield curve in the bond market, where short-duration rates are higher than longer-dated ones. The prices of new homes have been lowered, but that’s key to the hopefully receding inflation outlook. The key to the strength of this past week’s market was, of all things, Dow stock American Express (AXP). Much to the puzzlement of people who run big swaths of money, Amex’s strength came from millennial users. They are spending on travel and leisure and, most importantly, dinners out. But who can blame them. They are still remembering when they could do nothing during Covid. Plus, they love the points and the service. The Amexes, not the sideshow fintechs created by insane venture capitalists, are the winners. The stability of a market that’s based, in part, on the assumption of a JPMorgan (JPM) or an American Express or even a Boeing rallying on earnings, seems tidal to me. They stand for the broadening of it all, and the fact that it came after a huge overbought condition. That matters. When you study the S & P Oscillator, as I have, you get these confirmative moves when you experience further elevation as the Oscillator returns to the mean. That’s what’s happening as we consider the market to be far bigger than any group of a half-dozen stocks. No one company is important: The asset class prevails. It didn’t even matter that the incompetence of the men who run the machine surfaced again. The market is too strong for their stupidity — and the lack of actual names who were, well, stupid is a welcome sign. In short, we are experiencing the market’s liberation from FANG and friends. Even a miss by Apple can be explained away by the results of the pernicious, Orwellian-style release of people into a country, China, that had told you that Covid was a death sentence and the U.S. vaccines were worthless. You conquer that cynical belief system of the Communist Party with purchases of sneakers from Nike (NKE) and perfumes from Club holding Estee Lauder (EL), a la the lunar new year. You then have a pretty forgiving stance for Apple’s numbers. Undoubtedly, we have to get some bankruptcies soon, preferably by ne’er-do-well retailers and venture capital-backed fintechs and enterprise software firms and those who put money up for them. We need to rein in spending more so that the Fed can begin its period of peace having conquered those who kept paying up for the same thing. We are almost to the point, though not yet, where you can afford to job-hop. Thanks to Chipotle Mexican Grill (CMG) for announcing you need 15,000 people just when we thought the Fed was finishing its work. I guess that’s what burrito season brings us. Can we at least wait for the Super Bowl to be played? Yes, I am painting — without the help of ChatGPT, or its Nvidia (NVDA)-based backbone — a return to the era of no single company having real impact on the entire market, and no one move by the Fed doing so, either. The stalemate in Washington over the debt ceiling has led to the seemingly annual talk about a disastrous default that has always, to this point, been averted. The Fed may go with a completely against consensus 50 and say we aren’t done, stay tuned. We might even have misses among all the majors, but I am portraying a bull that just doesn’t care. It’s a bull that’s based on, not a lack of alternatives, which had been the case for three years, but a plethora of index fund money that follows the surges of whatever moves the needle collectively. You can boil all of this down to the suddenly hackneyed word, resiliency, as in the market is resilient in the face of its broad nature. We wait for the shortfall pronouncements from Apple, Amazon and Alphabet and move on NOT FROM THE STOCK MARKET but to OTHER STOCKS more representative of a resurgent America buoyed by its natural resources, its post-Covid strength, and its central bank that preserves purchasing power . We have the Russians, the Chinese and the Europeans to thank for that sanguine stance. The anticipation of what’s left of the FANG reporting season is simply prurient at this point and not dispositive. The drama is media created but ignored by 401(K) contributions and earmarked pension benefits that are actually being fulfilled. Sound too Panglossian? How about a hard-won battle with the narrowness of the bear that we have suffered from, not even seeming to acknowledge its beginning when the Fed went for preservation not profligacy back in the fall of 2021. The lack of credit to Fed Chairman Jerome Powell and company is astounding to me. But once a doofus always a doofus, from his lack of massive Treasury sales to his crazy cadence of rigor in 2022. Yes, I am shredding the cynicism and heralding the new bull market, one that’s not ignorant of what ails things, but is benignly rotational. The obsession with FANG a decade after its birth is over and that means more money for the rest of the 500 companies in the S & P 500 benchmark index. That’s something the media fails to acknowledge and that will be on display writ large next week. My take? Ignore the sirens of a Circe in Bear uniform. That now unheralded cohort and its despoiled fellow travelers didn’t even make the playoffs, let alone the two conference championships. This is a week we will get through and any decline will be regarded as a clarion call to get in — repulsed only by cynical market prognosticators who insist on being the sound and the fury signifying nothing as the bulls trample on and leave their underinvested legions to starve the once over-served steers. (Jim Cramer’s Charitable Trust is long AAPL, META, GOOGL, AMZN, MSFT, EL, NVDA. See here for a full list of the stocks.) As a subscriber to the 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 trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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Jim Cramer at NYSE with bull. June 30, 2022.

Virginia Sherwood | CNBC