CNBC’s Jim Cramer examined Monday’s market action and said investors shouldn’t be too concerned about rising bond yields.
“We are nowhere near the point where the bull can be slain by higher, longer rates,” he said. “Stocks have soared with bond yields at these levels before; in fact, they’ve soared with the 30-year at 5%, they’ve soared with the 30-year at 6%, so let’s stop it with the jeremiads.”
The indexes ticked lower on Monday as bond yields jumped, with the Dow Jones Industrial Average losing 0.8% and the S&P 500 dipping 0.18%. However, the Nasdaq Composite managed to creep up 0.27%. Some on Wall Street worried that the increase in yields means the economy is heating up again, and the Federal Reserve won’t be inclined to make more rate cuts.
But Cramer noted that the stock market has “had a fabulous run,” even as bond yields have been creeping up. He also said the recent 50-basis-point rate cut was supposed to add some fuel to the economy, and that’s what these yields indicate.
Cramer acknowledged that some investors, particularly traders with a more short-term view, are inclined to automatically trim stocks when bond yields rise. However, he said there also are some factors that should counteract the sellers, namely corporate buyback activity and inflows into index funds.
“The big buybacks and the S&P 500 index [fund] money serve as a one-two punch against the bears because they create a temporary stock shortage,” Cramer said.