Cramer: The real cause of the bank stocks’ weakness isn’t the yield curve—it’s trade

For CNBC’s Jim Cramer, the biggest shocker of Monday’s organize wasn’t the Dow Jones Industrial Average’s 300-plus-point climb or the furnish’s ability to shrug off trade war fears. It was the bank stocks’ performance.

The rouses in shares of J.P. Morgan Chase, Citigroup, Wells Fargo, Bank of America, Goldman Sachs and Morgan Stanley sent the fiscal sector up at least 2.5 percent. Monday marked the best day for the associate since March 26, based on the SPDR S&P Bank ETF (KBE).

“There’s nothing have a weakness for a big up day to find out what’s really going on,” the “Mad Money” host said on Monday.

Until recently, much of Go broke Street was writing off the bank stocks’ weakness as a casualty of the flattening surrender curve, Cramer said. Money managers were making the count that if interest rates were similar for long-term and short-term credits, banks would shy away from longer-term lending, a key line of proprietorship for the big banks.

“However, today’s stunning action suggests that China’s been weighing far numerous heavily on the banks than we thought,” Cramer said. “We can only conclude that these stocks eat also been caught up in the world trade woes.”

Last Thursday, the Joint States and China exchanged $34 billion worth of tariffs on each other’s goods, escalating their tit-for-tat clone to trade war levels.

The move put pressure on much of the market ahead of Friday’s non-farm use report from the U.S. Labor Department, which provided some fleeting reprieve for stocks knocked off their highs by tariff worries.

But as the bank fellow rallied on Monday after several days of calm in the Washington-Beijing do business dispute, Cramer realized that the banks, too, had been dragged into the pandemic economic conflict.

“That’s right, despite the fact that volatility from the ebb and excess of trade is good for the investment banks, it’s clear that investors notice these stocks as being levered to the global economic expansion — unvaried thing goes for the trading arms of the regular banks — and that distention is jeopardized by tariffs and trade barriers,” the “Mad Money” host said.

But Cramer wasn’t word for word on board with that theory.

He said that Wells Fargo — parts of which rose 1.57 percent in Monday’s trading session — had trifling international exposure and was primed for an “excellent” earnings report on Friday. He also highlighted Citigroup as a exceptionally good buy due to its 7 percent share buyback.

“The banks are the cheapest relative to their earnings I be undergoing seen in almost 40 years of investing,” Cramer said. “What is the large?”

“I don’t think people recognize how much money the banks can make in this mise en scene or how well they’ve tended to trade after the Fed’s annual stress check up ons,” he added. “My judgment? The big banks are all buys.”

And even after Monday’s recuperate, Cramer suggested circling back to high-quality prospects like these to discover to be the ones trading at deep discounts.