Jim Cramer sees a big risk to the bull market resurfacing — and it’s not the Iran war
Wall Street is focused on reigniting tensions between the United States and Iran but is more concerned about new stock and bond issuance that could threaten the bull market, CNBC’s Jim Cramer said Wednesday.
“I’m much more worried about supply, at least when it comes to the stock market — especially the flood of new stocks and bonds that are flooding that market and absorbing a lot of that discarded capital,” the “Mad Money” host said.
Cramer noted that companies issued staggering amounts of equity and debt last month. alphabet large share sale, SpaceX An $85 billion initial public offering and $25 billion bond sale, as well as major debt offerings from the following companies: Amazon. Although the market has met that supply so far, Cramer warned that demand could be approaching its limits.
“I’m afraid it’ll be too much,” he said. “I think the bull will suffer if the issuers and their investment banking minions don’t rein things in.”
Two recent deals have raised concerns for Cramer: Rivian’s discounted stock offering and based in South Korea SK Hynix It planned a $28 billion Nasdaq listing. He said electric vehicle maker Rivian’s discounted share sale suggests the market may no longer be willing to accept new equity capital at high valuations. Cramer also questioned whether institutions would have to sell existing assets to make room for the SK Hynix offering; This will potentially create additional selling pressure elsewhere in the market.
Still, Cramer said the market hasn’t reached an inflection point yet. He pointed out that there was a recovery in semiconductor stocks in Wednesday’s session. NvidiaAlmost $1 trillion in market value has been lost since the peak. Nvidia’s shares rose after The Information reported that China will allow a handful of AI companies to purchase a limited amount of H200 chips.
“We’re still in the balance,” he said. “Buyers still have some spare cash.”
But Cramer warned that balance could quickly disappear if companies continue to turn to investors for capital at the current pace.
“We have not yet reached the danger zone, but if these offers continue to come in, we will not be able to escape the danger of oversupply,” he said. “We need to see a break in IPO and secondary action. IPO abstention and M&A activity could still save the bull. But if we continue to get this level of supply for a few more weeks? The bull will suffocate under the weight of all this new paper.”
