Part of Tuesday’s stock market plunge may have stemmed from money managers giving up on getting clarity from President Donald Trump and his administration on their policies, CNBC’s Jim Cramer said as stocks settled.
“We have maximum uncertainty. That makes people want to sell. That’s how money managers view the situation,” the “Mad Money” host said after the Dow Jones Industrial Average ended the day nearly 800 points lower.
Over the weekend, Trump struck a cease-fire on trade with President Xi Jinping of China at the G-20 summit in Argentina. According to the White House, the two leaders agreed to postpone the Trump administration’s planned tariff hike from 10 to 25 percent for 90 days starting Dec. 1.
But while one White House camp — namely top economic advisor Larry Kudlow and Treasury Secretary Steven Mnuchin — seem optimistic about the prospect of a deal, U.S. Trade Representative and known China hawk Robert Lighthizer has emerged as a leading candidate for running the negotiations.
That sets up a battle between those who want a deal and those who would rather see China shed the title of global superpower, Cramer said.
“The president seems to actually enjoy these face-offs. They’ve become his style. The White House is the Thunderdome: two policies enter, one policy leaves,” the “Mad Money” host said. “But the markets crave certainty, which means they hate this kind of master-blaster, Mad Max confrontation.”
As a result, professional money managers — whose jobs call for predicting how certain policies will impact their investments — “feel like they’ve been had,” Cramer said.
“This is not some reality show, for heaven’s sake. It’s real life: real jobs on the line, [a] real economy at stake. While the president had a huge hit with ‘The Apprentice,’ governing the most powerful nation on earth is more serious than going to the top floor to learn who’s been fired,” he said.
“I think it’s starting to dawn on major-league money managers that … maybe they misjudged [the president]. Maybe he simply doesn’t take this stuff seriously enough to be considered dependable, even as what really matters [to his base] is the ratings, or the equivalent of [them], which means the White House version of ‘The Apprentice.'”
To make matters worse, Cramer worried that the Federal Reserve was back on autopilot, content with ignoring slowdown indicators and talking up the job market so it could push through its widely expected December interest rate hike.
But with the bond market doing what it tends to do before recessions, another rate hike could “push us over the edge,” the “Mad Money” host warned, saying that the Fed’s more optimistic members “sound like they’ve lost their minds.”
“The Fed isn’t thinking about how Toll Brothers just told us they had the lowest orders in the house business [in] four years. They aren’t thinking about stores with no cashiers like Jeff Bezos is. They aren’t debating what the cloud does to white-collar employment … [or] what Ford and GM are doing to blue-collar employment,” Cramer said. “They’re simply saying, ‘Friday’s employment number is going to be very strong and we don’t like to … look like we’re soft on wage inflation.'”
So, between the White House policy battles and the Fed’s insistence on following through on its interest rate raises, many stock-pickers and money managers feel like they’ve been left to their own devices, he explained.
“The bottom line is this: the president’s worrying people, the Fed is worrying people, and yet, somehow, they both think they’re being reassuring,” Cramer said. “They couldn’t be more wrong.”