CNBC’s Jim Cramer said Tuesday investors don’t need to track every market move to understand what’s driving stocks. Instead, he said three simple questions can provide a quick read on Wall Street.
“I learned early on that the averages don’t always tell the story,” the “Mad Money” host said.
The market is influenced by countless factors on any given day, but Cramer said investors looking to quickly take its temperature should focus on three: bonds, oil and Nvidia. Together, he argued, they offer a window into interest rates and the Federal Reserve, inflation and geopolitical risk, and the health of the artificial intelligence trade.
The first question Cramer asks is “where are the bonds?” Rising Treasury yields can make bonds more attractive relative to stocks, he said, while also increasing pressure on the Federal Reserve to tighten monetary policy. With the 30-year Treasury yield around 5.2%, Cramer said rates have reached a level investors cannot ignore.
“You must never forget that, as important as stocks are, the bond market is much larger and rules the roost,” Cramer said. “If interest rates are going lower, you likely have a robust market. If rates are going higher, you probably have a bad one.”
His second question: “Where is oil?” Higher crude prices can add to inflation and help explain moves in the bond market, he said. Oil has also become an important gauge of geopolitical risk, he added, as investors monitor the conflict with Iran and its potential impact on the Strait of Hormuz. Still, Cramer cautioned against overreacting to relatively small moves in crude, noting oil remains well below its recent highs.
Cramer’s final question is “how is Nvidia?” He views Nvidia as “the barometer for what might be as much as third to a half of the economy.” As spending on AI infrastructure spreads beyond traditional technology companies, he argued the chipmaker’s performance can provide clues about an increasingly large portion of the economy.
“I ask that for a host of reasons, not just because it’s the largest company on Earth,” Cramer said. “I ask because a huge percentage of this market is dependent upon the fortunes of Nvidia, the fortunes of AI, the fortunes of the data center.”
