CNBC’s Jim Cramer on Tuesday shot down the notion that the U.S. economy is staging a V-shaped recovery after the S&P 500 crossed closed at an all-time high, a full rebound from the major market meltdown triggered by coronavirus fears in the first half of the year.
The S&P 500, generally accepted as a temperature of the stock market, finally achieved the feat after bumping against its February highs since the beginning of the month.
“We’ve had a magnificent V-shaped recovery in the stock market, but the stock market’s not a great reflection of the broader economy anymore,” the “Mad Money” host said. “If anything, the actual economy’s in precarious shape, especially now that the government’s stimulus package has run out and Congress went home for the summer rather than trying to come up with a replacement.”
The benchmark index ticked up 0.2% to a record high of 3,389.78, almost four points higher than the last record it set in mid-February. The index finished about 0.16% off its intraday high of 3,395.06, also a record.
The S&P 500 joins the tech-heavy Nasdaq Composite, which has been placing new highs since late June, in record territory. The Nasdaq turned in another record day Tuesday after climbing 0.73% to 11,210.84.
The Dow Jones, the lone major average recovering from its losses earlier this year, slipped almost 67 points, or 0.2%, to 27,778.07.
“In a V-shaped recovery, the Dow Jones Industrial Average would be hitting new highs, but this move’s been led by the Nasdaq and the S&P,” Cramer said. “You don’t need to be a rocket scientist to figure this out. Just look the stocks that have brought us to these levels — they’re not the recovery plays. In fact, they are the opposite. They are stocks that tend to do well, because of what we call secular considerations.”
One of the most powerful secular trends in the economy — both pre and amidst the coronavirus pandemic — is the digital transformation, where business out outfitting their operations with technology to unlock efficiencies.
“The S&P 500’s not making new highs because of the industrials or the apparel stocks or retail or the banks, classic recovery stocks,” Cramer added. “No. This move’s been fueled by the biggest story of the Covid recession: digitization”
In the broader economy, millions of Americans are still without jobs and scores of small businesses continue to struggle through the coronavirus pandemic and the new normal, where restaurant capacities are limited and other businesses await the green light to reopen from government-ordered lockdowns.
“The S&P’s new highs are a tale told by an idiot, full of sound and fury, signifying nothing about the hardship of millions of people on food stamps, or the millions about to be fired from service jobs, or the homeless, or the people who are just huddled at home waiting for the vaccine, which currently feels a lot like waiting for Godot,” Cramer said.