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Why is Cramer bullish?

Cramer bases his bullishness on the latest major earnings reports — and a financial framework known as the Dow Theory, which “states that a significant shift between bear and bull sentiment in a stock market will occur when multiple indices confirm it,” according to WallStreetMojo.

For instance, if the Dow Jones Industrial Average and the Dow Jones Transportation Average experience similar upticks in price and trade volume over a certain period of time, this could confirm a bullish trend.

The ‘Mad Money’ stock picker says there’s a “roaring bull market” in the transportation industry — as shown by an uptick in the DJTA — with trucking companies and airlines posting strong second quarter 2023 results. And other industries enjoyed similar upticks.

“Suffice to say, you’re not supposed to get this kind of action at this point in a rate cycle,” says Cramer — alluding to the 10 consecutive interest rate hikes, totaling 5%, since March 2018. “When the Fed tightens, we expect it to crush commerce and that just hasn’t really happened.”

In PepsiCo’s (NASDAQ: PEP) second quarter 2023 financial results call, company executives said they hadn’t seen a trade-down, even though the food and beverage giant has raised its prices.

“This is interesting because it’s not supposed to happen after 10 rate hikes. You’re supposed to have a trade-down,” says Cramer. The consumer usually won’t stand for such increases at this point in the cycle but PepsiCo [shockingly] said there’s no problem. There’s nobody buying a house brand of soda.”

More: Brands you didn't know were owned by Pepsi

Even the country’s top banks — like JPMorgan Chase, Wells Fargo and Bank of America — reported great financial quarters, which according to Cramer, would not be possible if Americans didn’t have cash to spend.

“If the bears were right about the inevitable recession, it’d be the opposite: a strapped consumer, out of cash and hanging on by her fingertips,” he says. “Defaults are minimal, including defaults in the dreaded commercial real estate space, which I keep telling you was a well-overdone crisis.”

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Why Cramer’s diagnosis is nerve-wracking

The CNBC money maven is known for making bold and controversial claims … which don’t always come to fruition. This has resulted in the creation of the Inverse Cramer Tracker ETF (NYSEARCA:SJIM) which allows investors to actively bet against the ‘Mad Money host’ by shorting stocks he touts and going “long” on companies he advises against.

Clearly, not everyone agrees with Cramer’s bullish diagnosis on the state of the U.S. economy. After he made that call, many of his critics took to Twitter (now rebranding to X) to “translate” his prediction and argue the ‘Inverse Cramer’ ideology that the opposite must now be true.

Many senior economists and financial elites also believe a recession is imminent.

In June, Evercore founder and senior chairman Roger Altman told CNBC the U.S. is likely headed towards a “moderate recession” by the end of the year.

“You can look at the yield curve. You can look at … the small business confidence index. You can look at so many data points which are pointing downward,” he explained.

Kokou Agbo-Bloua, an economic analyst with France’s Societe Generale bank, said on CNBC’s Squawk Box program that he thinks central banks “need to trigger a recession to force unemployment to pick up and create enough demand destruction” — but not yet.

Even Elon Musk has said he’s bracing for a difficult economic downturn in the second half of this year. On Tesla's quarterly earnings call, he said: “I think we'll probably have a pretty difficult recession this year. Probably — I hope not, but probably.”

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Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.

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