CNBCs Jim Cramer said Monday that a new type of investor is behaving differently during the rally on the stock market during pandemic times than what they have traditionally seen throughout their decades-long career on Wall Street and in the financial media.
“There is a new young group of buyers who are not selling on the news,” Cramer said “Squawk Box.” “They’re very different from the older buyers. They don’t seem to want to sell. They see good news, and then they buy, and then no one comes up for sale. It’s pretty remarkable. We haven’t seen this pattern ever.”
Cramer’s comments before Monday’s opening bell followed the announcement by the American biotech company Moderna that it is Coronavirus Vaccine was more than 94% effective. The positive development pushed Moderna into the pre-market and at the same time pushed the US stock futures up. The Dow Jones industry average later morning trading rose more than 400 points. Moderna, whose shares rose nearly 400% in 2020, was over 7% higher.
Economically sensitive stocks led the way on Monday with airline tracking US Global Jets ETF by about 4%. Cruise company royal caribbean was higher by more than 7% while carnival was up over 11%. That group of stocks that would benefit from widespread Covid-19 vaccines that would contain the pandemic and enable a robust economic recovery were also major beneficiaries last week Pfizer and German partner BioNTech announced positive efficacy data from their late trial.
Last Wednesday, two days after the Pfizer news, Moderna also hinted that it would Publication of its preliminary test data shortly, which allowed the stock to rally last week. From Wednesday through Friday, Moderna shares rose more than 8% as the vaccine, like Pfizer’s, was expected to be highly effective as well, as they both use messenger RNA technology, a new approach to genetic material is used to generate an immune response.
The attempts at Moderna stocks and the broader stock market mirrored that “Buy the Rumor” Part of the old Wall Street saying. However, when Moderna actually released the data, there wasn’t much to sell, Cramer said. In other words, the second part of that saying “Sell on the News” didn’t really materialize. This pattern also appeared in the other sectors where the vaccine would work well.
“The moment we got some positive news from Moderna, there was a spike in purchases from the airlines, which I think is done through an ETF, through much of the hospitality, and they tend not to be shaken” he said to Cramer, who joined Wall Street in the mid-1980s Goldman Sachs and later became a hedge fund manager.
“That’s how we got up here,” added Cramer with the S&P 500 Friday closed at a record high and the Dow on Friday rose to around 72 points from its first record high since February.
At the same time, the U.S. is now seeing a significant deterioration in its coronavirus outbreak, with daily case averages at record highs and hospital admissions increasing significantly as well. Because of this, despite CNAP optimism, Cramer later told CNBC that younger buyers who continue to pile into economically sensitive stocks should be careful.
“The younger shoppers … who can’t wait to buy at 4:00 AM, 5:00 AM, 6:00 AM are just so excited and then the facts come and then the facts just don’t fit the story.” Said Cramer. “They make you feel like it’s going to be fine one day, but I just don’t feel like we’re going to be cruising in the next four months. I just don’t think so.”
Alli McCartney, managing director of UBS Private Wealth Management, told CNBC on Monday that there are several reasons stocks have risen despite short-term coronavirus headwinds.
“We have the perfect setting,” she said “Squawk on the Street” while Cramer’s observation of the power of younger, more enthusiastic investors is recognized. “We promise an effective vaccine. We have an election result that, in fact, is probably better than expected at a standstill, and we’ve pushed that rotation forward [earnings] Revisions have been pushed so that if we are bullish in the long term and volatile in the short term we are long term. “