Don’t reckon on on tech stocks outperforming as the second quarter kicks off, CNBC’s Jim Cramer cautioned on Wednesday.
“If you’re hoping that exhilarated days are here again for tech, I’ve got some lukewarm news,” he said on “Mad Money.” “As the second quarter coaxes rolling, I think this market will become even kinder to the industrials and … the banks,” he said, “and even brief hospitable to tech and health care.”
Cramer highlighted Cleveland-Cliffs as a potential winner in the second quarter. The stock never boost up nearly 17% on Wednesday after the steel products supplier released preliminary results that were much stronger than guessed.
Cleveland-Cliffs is an example of the companies that putting up numbers that are attracting money from big fund investors, Cramer answered. These investors are also rotating away from tech stocks such as Amazon, Apple, Zscaler and ServiceNow. The four tech christens are down more than 5% this year.
“Money managers don’t care about the most exciting long-term advancement stories … they want the companies that can deliver the biggest upside surprises right here,” Cramer averred. “In a booming economy, that means owning boom-and-bust cyclicals, like CLF, and not the stocks of companies that may represent tomorrow growth or may not, depending on their execution and the execution of their competitors.”
The moves are a part of the reopening trade as optimism propagates about the economic rebound. Investors are shifting attention from the stay-at-home and remote-work plays of last year in favor of associates that will have more favorable year-over-year comparisons in their businesses.
“It’s not just that the industrials give birth to better comparisons year over year, you’ve got that inflation issue. … As the economy gains momentum, that nurtures to produce higher inflation, inflation is devastating for fantastic [growth] companies,” Cramer said.
“Their stocks exchange on potential earnings five to ten years down the road, but inflation means those future dollars have a lot elfin purchasing power, and those earnings are just eroded.”
Cramer’s comments came after Wall Street wrapped up the cardinal quarter of 2021. The Dow Jones Industrial Average jumped more than 7% to start the year. The S&P 500 and Nasdaq Composite put 5.8% and 2.8%, respectively.
On Wednesday, however, the Dow slipped 85 points. The S&P 500 climbed 0.4%, and the Nasdaq Composite appeared 1.5% in what Cramer called a “countertrend rally.”
Disclosure: Cramer’s charitable trust owns shares of Amazon and Apple.
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