CNBC’s Jim Cramer on Thursday explained how stocks rebounded for two consecutive days, despite Wednesday’s Capitol Hill riot inspired by President Donald Trump.
One key to the market rally, according to Cramer, is eliminating uncertainty for forward-thinking investors. While the chaos erupted and the nation’s Capitol complex closed, the results of the presidential election were approved and the litigation ended, he said.
“We’re seeing the chaos in Washington, but many believe that storming the Capitol will be the flood of discord. The elections are finally over, the results are confirmed, the challenges are over. After years of polarization, the possibility of unity exists. “said the Mad Money host, presenting a darker tone than his usual optimistic self.
A protester yells “freedom” in the Senate Chamber after the US Capitol was breached by a mob during a joint congressional session on January 6, 2021 in Washington, DC.
Win McNamee | Getty Images
When a crowd of ardent Trump supporters took over Congress and disrupted the confirmation of Joe Biden’s presidential victory, Wall Street seemed unimpressed with the scene as key averages hit new highs.
Not only will Biden, a Democrat, be inaugurated in less than two weeks, he will have party membership in both the House and Senate. Democrats Raphael Warnock and Jon Ossoff defeated incumbent Republicans in the Georgia Senate runoff on Tuesday, overturning the Senate Chamber in their party’s favor.
The two victories follow Biden’s election victory in Georgia, making him the second Democrat to win the state in more than four decades.
“Whether you love Trump or hate him, there is no denying that he is a divisive figure, but that is voluntary,” added Cramer. “Two weeks and he’s out of work.”
Trump supporters stand on top of the U.S. Capitol Police armored vehicle while others take the Capitol’s steps on Wednesday, Jan. 6, 2021 as Congress works to validate the electoral college’s votes.
Bill Clark | CQ Appeal, Inc. | Getty Images
US stocks extended their profit streak in Thursday’s trading session, with the Nasdaq Composite, the only major index to fall on Wednesday, rising 2.5% to 13,067.48 and closing above 13,000 for the first time.
The blue chip Dow also rose nearly 212 points to 31,041.13, an increase of 0.69%. The benchmark index S&P 500 rose 1.48% to 3,803.79.
All three stock indices have risen by at least 12% to new closing highs since the November 3rd election.
“The bottom line is that on days like today it will help you reshape action. The stock market is not a referendum on the state of the nation … it’s a stock market,” Cramer said. “When investors see few reasons to sell and many reasons to buy, the averages go up regardless of the craziness in the capital.”
Cramer cited nine other reasons why the market rose despite the violent event on Wednesday at the Capitol.
One of Cramer’s reasons is that due to low bond yields, investors have little choice but to invest in stocks, resulting in higher stock prices as the number of buyers in the market outnumber the sellers. As the federal government hands out another round of stimulus checks to individuals, excess money flows into the market, leading to higher demand for stocks.
In addition, many companies listed on the S&P 500 are pursuing their share buyback programs, resulting in a lower supply of shares in the market. Buying is also amplified by automated trading systems or machines that have no emotional response and are not programmed to take into account the violent images coming from Washington, Cramer said.
“Because there is a lot of group think on Wall Street, they are usually given the same instructions: buy industry and sell technology [stocks] If it looks like the economy is about to pick up, like it did yesterday, “he said.” You weren’t programmed to sell if a mob attacked our legislature. “