Five fundamental trends are working in Wall Street's favor and should keep people invested in the stock market, CNBC's Jim Cramer argued Tuesday as the Dow Jones Industrial Average soared on some Washington-induced hope.
"I think the facts favor the more hopeful view right now, so it's worth staying in this market, as long as you recognize that if the trade talks break down, then we're going to get a decent decline," Cramer said on "Mad Money."
Cramer, a former hedge fund manager and longtime stock-picker, has seen a number of rifts emerge in this market that have led him to reassert his near-term bullishness.
From Morgan Stanley's bold call that Wall Street will see an "earnings recession" in 2019, to the president's mercurial stance on trade with China, to the daily swings in oil prices, to the bank stocks' underperformance, it's easy for investors to get lost in the shuffle as opposing sides pull stocks every which way, he explained.
So, to offer some clarity to those with a longer-term focus, Cramer flagged five things that can help investors "navigate [their] way through these confusing waters."
1. The Fed
Many great investors have preached — both publicly and to Cramer himself — that "as long as you're not fighting the Fed, you should be buying stocks," the "Mad Money" host said.
Now that the Federal Reserve has backed down from its initially hawkish plans for hiking short-term interest rates, it has effectively paved the way for stocks to head higher, giving investors a "green light," Cramer said.
2. The president
Love him or hate him, President Donald Trump "fundamentally wants the stock market to go higher," Cramer argued.
"I believe in Trump's willingness to change his mind to help the stock market," the "Mad Money" host said, citing the president's insistence throughout 2018 that the Fed curb its aggressive rate hike plans.
"Now, the president's not omnipotent, but if the market starts to get slammed, it helps to have a commander in chief who's willing to change policy to get the averages moving higher again," Cramer said.
3. Inflation
The United States is seeing low overall inflation as its economy grows, another good sign for stocks, Cramer said.
"When you have growth without inflation, you're supposed to buy stocks, not sell," he said.
4. Balance sheets
Corporate balance sheets are the strongest Cramer has ever seen them, indicating steady cash flows on the individual stock level.
"When balance sheets are strong, the stocks of those companies have a greater likelihood of bouncing back than in other times when their balance sheets are weak," he explained.
5. Stock prices
Historically, "stocks simply aren't expensive" at their current levels, especially if several ongoing, high-profile issues work out in their favor, Cramer argued.
"If we get a trade deal, interest rates remain low, [and the] Fed stays on the sidelines, then I bet we'll get a bunch of upside surprises and stocks will seem, in retrospect, cheap," he said.
Conclusions
"This market keeps seesawing because we're in a very binary moment where the glass-half-empty scenario is genuinely much worse than the glass-half-full scenario," Cramer explained.
So, as you navigate the action, remember these long-term drivers, he said, and don't let the intraday swings knock you off-course.
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