Key insights
- Jim Cramer advises investors to remain cautious and 'sit on their hands' amidst the U.S.-Iran conflict due to unpredictable market reactions. He highlights the conflicting signals and simultaneous rallies in disparate sectors like energy, financials, and retail, making it difficult to discern a clear market direction. The geopolitical uncertainty creates a challenging environment for trading.
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CNBC's Jim Cramer warned investors Tuesday against trading on headlines around the U.S.-Iran conflict, citing an unpredictable stock market that's steeped in uncertainty.
"We've got so many narratives going thanks to this war that I think trying to trade off it may be a waste of time and a waste of money," the "Mad Money" host said. "Here's the bottom line: … it makes more sense to sit on your hands."
That's because, according to Cramer, mixed signals between President Donald Trump and Tehran make it nearly impossible to bet on the war's outcome.
Just look at Tuesday's "wild day" of trading, Cramer said. Oil stocks like Exxon Mobil and Chevron advanced nearly 3% and 1%, respectively, on reports that the Pentagon is nearing plans to deploy thousands of soldiers to the Middle East. The gains, however, expanded into consumer and financial names, too, after Trump said that the U.S. is "in negotiations right now" with Iran. Banks like JPMorgan rose almost 1%, while retailer Walmart jumped more than 1%.
"It has been impossible to explain how these forces can exist at the same time, except that one group of buyers must be wrong," Cramer said. "But then again, it's impossible to comprehend how we could be bogged down in the fog of war with no real hope of extrication, at the same time that we've won the war and unknown Iranian leaders have given up what they wanted to be, which is a nuclear power."
It's odd to see groups like energy, financials, and retailers all rallying at the same time, Cramer said. Oil-linked stocks benefit from a prolonged war because of supply disruption concerns, while economically-sensitive names typically rise on optimism that conflict overseas is nearing an end.
"It's difficult to trade in a world where, in the morning, we are beating our ploughshares into swords and in the afternoon we beat them right back into ploughshares, especially since the oil shock means we're way short of fertilizer," Cramer said. "I think the war will sort itself out, but it's pretty clear that someone, either those buying the financials, the retailers or the buyers of the energy, one of them is dead wrong."
Cramer's remarks follow an overall lackluster day for stocks.
The S&P 500 fell 0.3% Tuesday, a reversal from Monday's session when the broad-market index jumped 1.3% after Trump said that the U.S. would halt attacks against Iran's energy infrastructure. At the time, Cramer also warned investors that the market's brief rally "reeked of fear" and could be short-lived unless the Iranian regime backs up Trump's claims.
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