This past week has been a rough one.
A parade of disappointing economic data had the market spooked that the U.S. economy could be heading toward a recession alongside the slowing global economy.
So far this week, the Dow has dropped 651 points, or nearly -2.5%, while the S&P 500 is down almost -2% and the Nasdaq has dropped -1%.
But according to CNBC’s Jim Cramer, “we were due for a pullback,” though he warned investors that they may be looking at things all wrong right now.
“The single biggest prop behind the recession thesis is the president’s trade policy, but maybe not the way you think,” the host said. “Trump’s tariffs on Chinese exports have done real damage to the Chinese economy, the second largest in the world. As China falters, it is taking the rest of its trading partners with it, especially Europe.”
“We are not going back to the 2009 economy,” Cramer said. “Frankly, I doubt our exports could take us down like that. They’re too small… to do that much damage.”
Cramer also said that there are other factors weighing on stocks right now that have little to do with the trade war or recession fears.
For one, Cramer says that now that we’re in the fourth quarter, mutual funds are beginning to take profits—especially in this overbought market—to allow their investors to prepare for tax planning.
Secondly, the latest batch of IPOs has taken a toll on the stock market. This year has seen several big-name IPOs flop, including Uber (NYSE: UBER), Lyft (NASDAQ: LYFT), and more recently, Peloton (NASDAQ: PTON), which opened below its list price last month and has been in free fall ever since.
Peloton’s debut was so poorly received in fact, that Endeavor Group Holdings—which was set to debut on the same day—pulled its IPO just hours before it was to begin trading and the company now says it’s delaying until next year, at the earliest, as it waits for a better IPO climate.
And then, of course, there’s been WeWork. The embattled office-sharing unicorn had twice-delayed its IPO before finally saying it would formally file to postpone indefinitely amid concerns about its sinking valuation and corporate governance which forced co-founder and CEO Adam Neumann to resign late last month.
But all of the pressures weighing on the market aside, Cramer says that as stocks fall, now is the time investors should be looking for stocks to add to their portfolios.
“If you’ve been selling stock for weeks to raise cash, as I’ve been advising you to, this is a good time to start looking for stocks to buy into weakness,” Cramer said. “But if you’re living in fear of a recession… I think you’re going to miss out on some terrific opportunities.”