It’s never a good thing for the stock market to go in hot into earnings season, Jim Cramer says.
„We want things cool. There is too much heat. That is why I’m hoping we get some more down days this week, just in case the earnings aren’t as perfect as they need to be after this historic run,“ the “ Mad Money “ host said.
Looking at the overall context of the market, Cramer wasn’t impressed. In fact, he thinks that is the major reason why the Dow failed to hit 20,000 again.
The banks have led the rally, especially Bank of America , which has jumped to $22 from $17 since the election, and Goldman Sachs , which has gained 46.5 percent in the past three months.
„The issue with these stocks, so vital to the next leg of the rally, is that they need interest rates to go higher if they are going to keep rising, and interest rates seem to have peaked for the moment,“ Cramer said.
JPMorgan , Wells Fargo and Bank of America all report on Friday and Goldman reports next week, and the backdrop right now is sub-par for Cramer. It would be better if the stocks sold off ahead of their quarters, he said.
The second problem Cramer found was in healthcare. The group has bounced since the election, but investors don’t know when Donald Trump could tweet about drug prices. As the market heads into the important JPMorgan health care conference this week, Cramer suspects that the event has been more muted because of worries over pricing.
Many pharma companies also have a large amount of overseas currency exposure, which could hurt earnings when compared to the strengthening dollar.
Cramer also worried about the price of crude at $52, as it could prevent oil stocks from going higher. If anything, he expects them to move lower. Thus, investors may not be able to count on the oil patch to do the heavy lifting in the market.
The final worry on Cramer’s list was technology, especially Apple , which was anointed as a top pick by Morgan Stanley because of the impending iPhone 8 and the possibility of repatriation relief.
„I much prefer downbeat talk that keeps expectations low,“ Cramer said.
That is why moving into earnings season, Cramer is hoping for more downgrades and negativity in the stock market in general. More sell ratings could create much-needed pessimism to cool stocks down.
After all, when everyone is bullish, that means there’s no one left to buy. More negativity could help sustain the move.
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