Key insights
- Jim Cramer notes that consumer stocks, particularly discount retailers like TJX, Dollar General, and Ross Stores, are underperforming despite the expectation that they should benefit from a weakening consumer due to high gas prices and war fears. This suggests investors are reacting more to geopolitical headlines than economic fundamentals, creating a potential disconnect from typical market behavior.
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CNBC's Jim Cramer said Monday that fears surrounding the Iran war are even crushing stocks that have historically been winners when consumers begin pulling back.
"If the consumer's really getting weaker thanks to gasoline at $4-and-change, then they should be buying the stocks of TJX, Dollar General, Dollar Tree, Ross Stores and Five Below," the "Mad Money" host said.
But that's not happening.
As concerns grow that the Iran war could drag on after President Donald Trump rejected Tehran's latest proposal to end the conflict, investors have increasingly sold consumer-facing stocks amid fears that elevated oil prices will weigh on household spending. The SPDR S&P Retail ETF fell roughly 3.6% on Monday, getting no help from discount retailers and off-price chains, which tend to outperform during tougher economic periods as consumers trade down.
Cramer pointed to TJX — parent company of T.J. Maxx and Marshalls — as one retailer that is typically "superb in this environment" because it benefits when other chains are stuck with excess inventory. Cramer added that his Charitable Trust, the portfolio used by the CNBC Investing Club, owns the stock and has discussed buying more given its recent decline. TJX lost almost 3% on the session.
Other names that have historically held up in weaker consumer environments are also struggling. Five Below, which sells entirely discretionary products, has been "slaughtered," Cramer said. The stock dropped roughly 6.7%.
Despite posting strong results, Ross has become one of the market's worst performers. "Ross had the best numbers of the group, yet it is one of the worst performers in the entire S&P 500," he said. Ross sank approximately 5%.
For Cramer, the disconnect suggests investors are reacting emotionally to headlines around war and oil rather than following the typical playbook for a weakening consumer.
"It's now pretty clear that this war's with us for the long haul," he said. "Certainly, now that's how Wall Street is judging it."
Ultimately, Cramer cautioned against trading on headlines and argued that investors betting on a weaker consumer may need to rethink where they're placing their bets.
"Buying retail because the wrong stocks have gotten cheap?" he said. "That hasn't worked."
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