Jim Cramer said Wednesday that investors have rotated away from fast-growing stocks and into “clean companies with no real flaws.”
“But the bottom line is that today’s winners are immune to the fallout from the trade war,” the host said. “They can create terrific earnings from the consumer, or from health care businesses, that have nothing to do with China.”
This week has seen strong earnings reports from some of the big banks including JPMorgan (NYSE: JPM), Citigroup (NYSE: C), Bank of America (NYSE: BAC), and Morgan Stanley (NYSE: MS), with all four beating estimates.
Morgan Stanley is up 1.52% Thursday after reporting net income of $2.2 billion, or $1.27 per share, while JPMorgan is up 3.35% since reporting Tuesday, Citi is down just slightly since reporting, and Bank of America shares are up nearly 4% since reporting on Wednesday.
Cramer pointed out that Bank of America posted 7% loan growth in its consumer banking division, indicating that consumers are still in good shape. The CNBC host also noted that big banks haven’t been held hostage by the trade war due to their link to the consumer economy.
“With their consumer emphasis, the big banks can decouple form the trade wars,” Cramer said. “Now, I know the Commerce department just released some ugly retail sales numbers… down 0.3% in September, but these banks tell a different story. They’ve become the ideal names for this Starkist-style market… they’re not flashy, they’re just tasty.”
Retail sales unexpectedly dropped in September as consumers slashed spending on building materials, autos, and online purchases, adding some fuel to the fears that cracks are forming in the consumer spending that has propped up economic growth over the last few months.
Between the slowdown in manufacturing and weakening business investments, as well as the ongoing trade war with China, if consumer spending continues to fall, BMO Capital Markets’ Ian Lyngen says a “more durable slowdown” could strike the economy.