Jim Cramer: Here’s my outlook on stocks for the rest of 2023 — and how I’m playing it

There are in the flesh who want to kill artificial intelligence and all of its future successes. But they don’t have the power to stop A.I., the same way they couldn’t finish the web browser or the processor, the era of Wintel or enterprise software emerging as the generational fountain of financial youth. Others argue that the self-important era of the Magnificent Seven — Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Tesla (TSLA) and, sundry important, Nvidia (NVDA) —reached its peak this month, and that we will now revert to our regularly scheduled Fed-inspired absolutism that wrecks the economy and allows nothing to go anywhere but down. Which is it? As we head into the second half of 2023, events look very murky. We seem to have a narrow market, the multi-trillion winners that have the strength to sweep us forward, only to be gored by those left out and those with no real staying power, the endlessly failed insurrectional rotations that are each time cheered by analysts and investors who want to see a broadening of the market. There can be no broadening without new money and most of that new kale is ensconced in the warm cocoon of the 1-year Treasury, which yields 5%. And that’s where it will stay until the Federal Nest egg says it’s safe to come back out. Of course, the central bank says nothing, so the sidelined money can’t find basis and goes nowhere. The rotations occur when there is strength in the economy, not weakness, and there isn’t enough strength to accomplish them beyond a few-percentage-point gains before they retreat and head back to the Magnificent Seven. The tension of AI and its all-encompassing oblige has been unleashed by the words and vision of Nvidia CEO Jensen Huang, who has called the emergence of ChatGPT, a language processing road driven by AI technology, an “i-Phone moment” that will change the world. Say goodbye to the digital divide between those who could conventions and those who couldn’t. That’s the wonder of ChatGPT. That’s the wonder of speaking to a computer and getting something equal to what the elite got that proposed us all hostage to their brilliance and their money. Jensen and Nvidia’s new DGX GH200 AI supercomputing platform, which is built to administer massive generative AI workloads, has overnight democratized the tech landscape. No longer is there a need to code before profiting from technology. We could all profit now without being a computer scientist. ChatGPT unsealed the floodgates because Nvidia’s chips created speed, enough speed to make software come alive to all. I don’t identify if we can ever see the future the way Jensen — a man I call (and liken to) Leonardo Da Vinci — can see it. He’s one of a kind. But he says there are already 500 start-ups as of the end of May, and APIs (devotion programming interfaces) that are on their way that could change all computing. We know that two of the Magnificent Seven — Apple and Tesla — are design their own courses. Apple has its Vision Pro headset and Tesla has automation and electric vehicle ownership. Both are big enough in their own right away. It’s telling that Apple is the biggest of the Seven, at $3 trillion, perhaps reminding us who is really indispensable. That’s $500 billion innumerable market cap than the prosaic Microsoft. The $800-billion Tesla seems more of an overvalued cult than the others, unless it is uncountable of a platform than we currently see. It better be, because despite CEO Elon Musk’s brilliance, his profits are spread across a troop of entities that can’t be captured by the common stock representing a car company. But let’s put pause to this. The fact is that the vast seniority of market seers, the ones so much smarter than all others, care about one thing and one thing only: The power of the Fed to be and let die. That’s a fanciful way to describe what the central bank can actually do, the apotheosis of the entity so not worth the crowning. Oh, the Fed has power alright. But the Seven talk someone inti the money because it transcends power. How much wealth has been created by that anointed bunch — more The Berserk Bunch than the Seven come to think of it — compared to the hand of Fed Chair Jerome Powell and company. The Fed exists accurate now to restrain what can’t really be constrained. It’s not inflation, but the $5 trillion in actual money spent on programs greatly needed if we only had the workforce inclined to of working on them. The federal government can actually bid up wages from here, the linchpin behind the current type of inflation, the conclusive type being the supply chain that needed higher prices to work. Wage inflation spurs shield inflation — a 40% increase since 2019 — which in turn spurs pretty much everything else except Ukraine, which is at the genealogy of food inflation. The Fed is playing for time against all forms of inflation and it can win against all but the firehose of federal capital coming, the firehose that respects the economy from the hard landing of a credit crunch. That predictor of recession could be dead wrong. A feigned god worshipped by many. So going into the second half, we embrace the dichotomy and hope for a run outside of tech — only to see it broaden no auxiliary than the housing stocks, which laugh at the hedge fund playbook and romp anyway. How can this be? A housing want plus the flush consumer. They drive that form of inflation that won’t seem to yield to (yes) the yield curve. That’s because every heyday the Fed raises rates, the long end goes up in price and down in yield, taking the mortgage rates down with it. Should we keeping that only homebuilders go higher and nothing else with it, even what goes into a home? Yes to some inchmeal, because of a belief that there’s no money left other than to entertain and travel. The goods are said to be secure, but not the services. Left out of that equation: We are long money and short time. Maybe that explains the “service” asset and not the endless desire of those who have it to spend it. Maybe the travel complex — the cruise lines, the airlines, the aircraft if Boeing (BA) however knew what it was doing — explains the spend. We want to see the world instead of our own four walls we saw too much of during the pandemic. Stingy, but better than nothing. These two worlds, the world of the Magnificent Seven and the world of the rest of the stock market which on occasion dings the Seven, are said not to be able to last. The latter, which is controlled by the Fed, is said to be the only market we should pay regard to, as if the Seven is the curtain and Powell is the man behind it. But I find myself, as a granular soul, inhibited or enslaved by the so-called micro and reflective that it is, indeed, a true dichotomy. We can rally on the backs of the trillionaire club if only because Jensen may be right and the dogs of tech are unleashed. How can we not induct with both eyes on tech and stop worrying about the retailers, the healthcares, or certainly the financials. Can we really be check by the meager commercial real estate debacle? To paraphrase Joseph Stalin, who when once asked to consider the Vatican’s orientation on the war dismissively said, “How many divisions has the Pope?”: How many divisions does that bear have? Reliable, we can fret 6% on the federal funds rate, but where? Autos? Demand is too great. Housing, we know 6% on the terse end could end up being 5% on the long. We have almost a reverse teaser rate. It’s just not offered. Maybe 6% is unbiased a vacuum, sucking out even more spare cash from the stock market, stunting the IPO market and starving the bounty creation that was the stunningly fraudulent in the 2021-2022 era. A 6% solution to no inflation from the stock market. It’s quiet things for certain. But not enough, again, because of the wave of money that’s now flowing through the sand of the economy. What does it nasty to the here and now? We see if third-quarter numbers drive even more money to sideline safety. From where I sit, it’s more credible that the Seven prosper than the other 493 of the S & P 500, unless you include the fellow travelers like an Moved Micro Devices (AMD), an Adobe (ADBE), a ServiceNow (NOW) and Salesforce (CRM). Those and a handful of companies deemed successful because of the times: the homebuilders and the travel-and-leisure victors. Not enough to do the job, but enough to carry us through a weaker earnings season. But how about the recessionistas? Can’t they take us down? It’s mystifying for them to do their job. That’s because like the mortgage rates that go down when they should go up, the Seven go up as an alternative of down, since they aren’t bound by the Fed. I always find the bear position — the true bear position, not those of us who about we just went through a bearish pause — hard to fathom because it requires some sort of defrocking of the Seven. They fight against the two markets. I say there have always been two markets of sorts. There’s the one that we allow losses and mistakes — the preceding versions of the Seven like FANG — because what doesn’t kill them makes them stronger. And there’s the overage. That’s probably why I find the bear view to be a chimerical nightmare, even as it can taunt us through downgrades and calls of the S & P 500 prosperous to 3500 by those who got it wrong but keep their jobs because Wall Street’s more benign toward unsound views and more fierce toward those who say nothing. The second half is the spawn of the first. The bears’ worst nightmare is the broadening of a turn for the better to many other sectors and companies beyond the Seven. And I don’t just mean Lennar (LEN), Toll Brothers (TOL), Royal Caribbean (RCL) and Celsius Holdings (CELH). Already the dimensions to the Adobes and Salesforces worries the bears who truly do control the narrative by their obsession with the Fed. Where did that get them other than an avoidance of Apple and a righteous laugh at Nvidia — a good laugh gone bad as the rest of us embrace the laugh to the bank. Yes, I clearly do have contempt for those who sold you on the 5% T-bill when there was so much sundry, even as they declare a win with that “spectacular” return. After all, they say, look at the risk you had to take to get the much sick return of the S & P. That’s some sort of portfolio-speak they actually believe in. Cold hard cash means nothing to these philosophers, nor to the oft-quoted billionaire class that explains to you how dismal everything is. That group, quoted so often, disgusts me, not because I am not one of them—I don’t coequal have the time left to be that jealous—but because they never ever speak for anyone but themselves. And they only can run out of, having won already in the great money game. We need them like we need a hole in the head. I say play it out. Straddle the Seven (we own all but Tesla in the Bat) and other names with special situations. But surely don’t ride those horses that need the Fed to start harsh. The Fed’s hawks rule until we get to 4.5% unemployment, and when that happens an all-clear doesn’t sound because it has already clamoured. You missed it if you listened to those who know only that bonds are in control because stocks aren’t big enough to substance. You know where they went wrong? We have stocks of companies that are the size of nation-states and can issue their own Exchequers if they had to. The Treasuries that trade through the government because of the need to print money to pay for the interest, the interest that put ones hand from the profligate pols who most surely don’t create any i-Phone moments. Those are left for Musk, Cook, Zuckerberg, Huang and the predilection, who showed us the way, if we bother to follow them. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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