by Sometimes the shares say it all. Going over about 1,000 stocks this weekend, I was surprised to see that the stocks with the strongest charts were those in the most offensive categories. Whether it is supplied steel companies US Steel (X) and Cleveland-Cliffs (CLF); chemical company Westlake (WLK); homebuilders such as PulteGroup ( PHM ) and DH Horton ( DHI ); aggressive retailers Abercrombie (ANF) and Gap (GPS); or, of course, every oil company, it’s a pattern of incredible strength. Large and small banks have also been on the rise, which seems to be about fewer bad loans. Their strength says, “We don’t have to worry about defaults because the consumer holds up.” No wonder Club holding Wells Fargo (WFC) stands out. So is JPMorgan Chase (JPM). They are the two big banks that are in a cross-section and have lots of loans and deposits. The collective assessment of the market is that both firms will profit well from these loans. That’s the kind of gut that indicates the Federal Reserve is going to slow rate hikes, meaning we could see a mild recession this year at worst. On the other hand, it doesn’t seem to matter how well defensive stocks do, or that the headwinds of commodity costs and supply chain issues are abating. Not even a weaker US dollar has done much to prop up these stocks against further decline. There is a group, but it’s just hard to call, and it’s technology. The hardware technology looks strong. The software technology looks weak. Enterprise technology seems disastrous. Semiconductors samples. But megacaps? There is a lot to chopping. What has happened here? We know that all the different inflation indices are going down, or rolling over. The box had been checked for goods for ages. A peak in services and consumer prices appears to be in sight or, in some cases, in the rearview mirror. But the battlefield is wages. The US unemployment rate is still too low. It’s so hard to figure out how wages can go down or even stabilize when it’s so easy to get a job. Somehow the stocks are saying this is the quarter when layoffs will start to fall. I’m not sure. We’ve had some significant layoffs at club teams Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT), and Salesforce (CRM). But we are dealing with the richest of the richest, who are simply cautious. At this point, after a giant run of rate hikes, you’d have to believe we’d see weakness in the homebuilding industry and layoffs in all things housing. But there has been no pressure on their margins. It’s amazing how bullish it is. And at the same time we have almost no bankruptcies. Most of all, we see no shutdowns or concerns among all enterprise software companies. The stock market is inhospitable to more fundraising or IPOs. But the Fed can’t just rely on megacap tech companies as the ticket to a rate cut. I will not oppose this move. It’s so tempting to buy more Johnson & Johnson (JNJ) for the Club portfolio, but I can see it falling more if it doesn’t blow out the quarter. Procter & Gamble (PG) reported such a strong financial second quarter last week, but the market interpreted the results as weak. It is because of this dichotomy that investors seem to want a steel mill stock much more than the kind of stock you buy in a recession. But I also don’t think that the chorus predicting a so-called hard landing, or major recession, for the economy has been silenced. I judge by stocks, but the lazy intellects addicted to looking at bonds – and looking at the yield on the 2-year Treasury and the 10-year Treasury – won’t stop at the hard-landing task. They have the microphone so often because it’s just easier to read the bonds than the stocks. Most of these people don’t even know what a single company does. But we’re now in blackout mode for Fed officials ahead of the central bank’s meeting later this month, which means less talk of more aggressive rate hikes. Right now, though, we’ll have to see if there are any earnings reports that will change the direction of these unlikely winners. Each of the megacaps has its own problems. Why did Alphabet and Microsoft let go of so many people? How did Microsoft get eight points on Friday? Are Alphabet’s numbers coming up? Amazon hasn’t done enough to create a better bottom line. Meta is becoming a sideshow. And Apple is the problem. I want to overlook the quarter, but will others? I think we will get lower prices for the recession camp, but then we will have to buy these stocks just because they will be cheap versus the bonds. The bulls are involved now. But because technology is seen as the market by so many, it just doesn’t feel that way. I encourage two things: Don’t be blinded by the tapes and don’t be confused by the action in the big technologies. Amazingly, both can be sideshows for anyone who actually bothers to look at individual stocks. (See here for a complete list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive an exchange alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share 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 INVESTMENT CLUB INFORMATION ABOVE IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY ALONG WITH OUR DISCLAIMER. NO OBLIGATION OR OBLIGATION EXISTS OR IS CREATED BY YOUR ACKNOWLEDGMENT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR REWARDS ARE GUARANTEED.
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Sometimes the shares say it all. Going over about 1,000 stocks this weekend, I was surprised to see that the stocks with the strongest charts were those in the most offensive categories.
