Investment firms are making a habit of raising stock price targets and the market appears to be confirming the calls being made by analysts, CNBC’s Jim Cramer said Tuesday.
“Almost every single time a Wall Street analyst says a stock’s going higher, perhaps far higher, the market proves them right. There are just that many bulls out there — people who want to believe,” the “Mad Money” host said.
“It’s incredible that something as prosaic as price target boosts are actually moving stocks higher, the ultimate self-fulfilling prophecies,” he said.
The comments came after major U.S. averages clawed back some of their losses Monday. The Dow Jones Industrial Average picked up 60 points to close at 31,068.69 with a gain of 0.19%. The S&P 500 inched up 0.04% to 3,801.19, and the Nasdaq Composite rose 0.28% to a 13,072.43 close.
“Welcome to the world of the bull market 2021, where brokerage houses routinely raise their price targets each day, often on the same stocks, and the public just laps it up,” Cramer said.
After the coronavirus pandemic and lockdowns last year led analysts to slash corporate estimates and price targets across various sectors, they are reassessing the path forward for businesses as they and the broader economy attempt to recover from recession, he said.
“Instead of a vicious cycle down the drain, we got a quick pivot, followed by what’s known as a virtuous cycle higher, led by the endless, ready-made price target boosts that Wall Street’s so good at,” he added.
Cramer said recent calls being made in research notes are fueled in part by last year’s historic government intervention, including by Congress and the Federal Reserve, in the first half of 2020 to absorb some of the economic fallout from coronavirus lockdowns. Cramer called it the “most effective federal response to a recession in living memory.”
The stock market recovered from the February-March meltdown and returned to new highs later in 2020 as Covid-19 developments sparked optimism on Wall Street about a V-shaped economic recovery.
“This moment is a nightmare for the bears but nirvana for the bulls, especially with the government finally pushing to vaccinate everyone over 65,” Cramer said. “As long as the virtuous circle of number bumps … keeps propelling stocks higher, you’ve gotta stick with the bull market.”