Jim Cramer, former hedge fund manager and host of CNBC’s Mad Money, is notorious for making ill-timed calls regarding the financial markets.
The divisive yet electrifying media personality issued a stark warning on Saturday, April 5, predicting that the stock market could face a situation similar to Black Monday of 1987 should President Trump stay the course regarding his latest tariff package.
This was by no means a fringe prediction, as all signs pointed to the beginning of a stark correction for the stock market.
Since trading does not occur over the weekend, the most appropriate reference point to use is the S&P 500’s close on Friday, April 4. The benchmark index stood at 5,073 at the end of last week.
Indeed, the S&P 500 opened 2.36% lower, at 4,953, on Monday, April 7. By the end of the trading day, it had risen to 5,062 — a figure that still represents a 0.21% drop from Friday’s close.
Amazingly enough, Cramer’s ability to sway the markets by offering a prediction also held true this time around. By press time on April 8, the S&P 500 had climbed back up to 5,206.
Accordingly, the benchmark index is currently up 2.63% since Jim Cramer issued his bearish prediction.
Why Jim Cramer could end up being right in the long run
Ultimately, as humorous as another instance of Jim Cramer seemingly being dead wrong is, the Mad Money host could end up actually being right in the long run.
At present, none of the crucial factors that drove the market-wide correction have been alleviated. President Trump is still insisting on enacting tariffs against most of the world, and while there are reports that plenty of nations are interested in negotiating deals, the world’s second-largest economy, China, has vowed to implement a retaliatory 34% tariff on all American goods.
As encouraging as the “bounce” has been, Wall Street analysts have cut their estimates for the benchmark index by an average of 16.4%. Searches for the term ‘Black Monday’ on major search engines have skyrocketed. While several major U.S. stocks rallied on Monday, other equities crashed, indicating that the market is still pricing in potential risks and economic uncertainties, at least outside of the tech sector.
While the financial markets might prove to be resilient in the near term, inflationary pressures and economic slowdowns from the trade war could culminate in a recession, which would, expectedly, cause a crash in the financial markets as well.
Readers should exercise caution and avoid making hasty decisions, at least until a clearer picture emerges of how the ongoing trade dispute will unfold.
Featured image via Shutterstock
