Don’t count on tech stocks outperforming early in the second quarter, UKTN’s Jim Cramer warned Wednesday.
“If you are hoping that the happy days return for technology, I have lukewarm news,” he said on “Mad Money.” “As the second quarter unfolds, I think this market will become even more favorable to manufacturers and… to banks,” he said, “and even less hospitable to technology and healthcare”.
Cramer highlighted Cleveland-Cliffs as a potential second-quarter winner. The stock climbed nearly 17% on Wednesday after the steel products supplier released much stronger than expected preliminary results.
Cleveland-Cliffs is one example of companies posting numbers that attract money from large fund investors, Cramer said. These investors are also turning away from tech stocks like Amazon, Apple, Zscaler and ServiceNow. All four tech names are down more than 5% this year.
“The portfolio managers don’t care about the most exciting long-term growth stories… they want the companies that can deliver the biggest surprises on the upside here,” Cramer said. “In a booming economy, that means owning boom-and-bust cyclics, like CLF, and not the stocks of companies that may or may not represent future growth, depending on their execution and that of their competitors.”
These moves are part of reopening trade as optimism grows over the economic rebound. Investors are shifting their focus from last year’s home and remote work games to companies that will have more favorable year-over-year comparisons of their businesses.
“It’s not just that manufacturers have better comparisons year after year, you have this inflation problem.… As the economy gains momentum, it tends to produce higher inflation, inflation. is devastating for fantastic. [growth] companies, ”Cramer said.
“Their stocks are trading for potential profits in five to ten years, but inflation means those future dollars have a lot less purchasing power, and those profits are just eroded.”
Cramer’s comments came after Wall Street ended the first quarter of 2021. The Dow Jones Industrial Average jumped more than 7% to start the year. The S&P 500 and the Nasdaq Composite gained 5.8% and 2.8% respectively.
On Wednesday, however, the Dow Jones slipped 85 points. The S&P 500 climbed 0.4% and the Nasdaq Composite jumped 1.5% in what Cramer called a “countertrend rally”.
Disclosure: Cramer’s charitable trust owns shares of Amazon and Apple.