CNBC’s Jim Cramer has attributed the weakness in the stock market to the growing competition presented by U.S. government bonds. Despite this, he suggests that investors should view this as an opportunity to buy stocks that can perform well even in a higher yield environment.
One of the factors contributing to the stock market weakness is the rise in Treasury yields. On Tuesday, the yield on the benchmark 10-year note reached a 15-year high of 4.566%, while the 30-year Treasury hit a 4.7% yield, a level not seen since 2011. Consequently, the S&P 500 has declined by 5.2% in September, and the Nasdaq has seen a loss of nearly 7%.
Cramer believes that although the increased yields have impacted stocks, interest rates will eventually reach a peak after the Federal Reserve successfully addresses inflation. In light of this, Cramer advises investors to buy stocks incrementally, ensuring that they have cash reserves to take advantage of further buying opportunities in the future.
To navigate this market environment, Cramer recommends looking for companies that can thrive and generate profits even in a higher interest rate environment. Specifically, he mentions Nvidia as one such company, emphasizing the importance of finding stocks that have long-term growth potential.
Cramer contrasts investing in stocks for wealth creation with investing in Treasuries to preserve existing wealth. He advises a mix of both, cautioning against going all-in on bonds as it could cause investors to miss out on potentially lucrative opportunities in the stock market. While this may seem unlikely, Cramer highlights that it is a common misconception that stocks cannot perform well during periods of rising yields.
In conclusion, Cramer’s outlook remains optimistic, suggesting that investors take advantage of the current market weakness to buy stocks that can thrive in a higher yield environment. He encourages a strategic approach to investing, gradually adding to positions while also keeping some cash on hand for future buying opportunities.