Wall Street made a remarkable comeback in Monday’s session, and CNBC’s Jim Cramer thinks investors who bought during early declines should be content with that pick even if the stock market later retests its lows.
“This kind of stocking tends to be revisited, because the [S&P 500 has] has now fallen 10% from its high, and those who bought at today’s low will scalp their gains” early in Tuesday’s session, the “Mad Money” host predicted.
“But the bottom line: If you bought into today’s weakness like I told you, … if you bought into what felt like a selling crescendo, then I think you’ll end up being satisfied. of your decision,” Cramer added.
Cramer’s Monday comments are ultimately based on what he called the concept of investment discipline.
“Sometimes it feels like nothing is working. Valuation? No. Sentiment? No. Earnings? as bad as it looks.” Cramer said.
On Monday, the Dow Jones Industrial Average was down about 1,100 points before turning around and ending up 99 points. The Nasdaq Composite advanced 0.6% on Monday after falling 4.9% earlier.
“At today’s low, the sellers weren’t just scared of the bear; they were scared of a recession. The market keeps going down when there are fears of a recession, but it almost always tops out,” Cramer said.
Part of Wall Street’s weakness likely relates to the Federal Reserve’s two-day policy meeting that begins Tuesday and is expected to end Wednesday, Cramer said. He argued that some investors feared Fed Chairman Jerome Powell might take a more hawkish stance on inflation, so they’re selling stocks to get ahead of that.
“At the time, that seemed like a very rational approach, but since when has the stock market been rational? Cramer asked, rhetorically. Instead, he pointed out that to navigate this type of choppy market, investors need to know the prices at which they think a stock is attractive, and then pull the trigger to buy it when it hits that level.
“It’s a form of discipline. It’s a discipline for me. It’s worked in pretty much every downturn except the Great Recession. It certainly worked well today,” Cramer said.
Register now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.