CNBC’s Jim Cramer hasn’t exactly been subtle in his comparison of this recent market downturn to our 2011 financial crisis. He terrifically underscores how both of these phenomena appear to be completely unmoored from gaudy company profits. Cramer’s point is that the three-week losing streak in the markets isn’t a fair representation of how well U.S. companies are doing financially. Instead, he thinks it’s a case of bigger economic forces at work, particularly fears over the U.S. debt ceiling.
Cramer noted that the circumstances of the current market resemble those of 2011 when multiple countries in the Eurozone struggled with debt repayment and deficit spending. He called the 2011 crash “almost manufactured,” and is adamant that what we’re witnessing now is just as artificially created.
“Just like 2011, it’s a very manufactured crisis — something totally man-made that can be un-made with the stroke of a pen,” Cramer stated. Relatedly, he discussed that U.S. firms have been beating earnings estimates. Today, stocks are down further, showing that these strong financial results aren’t moving the needle in the current market environment.
Cramer pointed out that what calmed the markets during the Eurozone crisis was the promise from former European Central Bank President Mario Draghi. During that crisis, he famously pledged to do “whatever it takes” to quell the storm. Draghi’s pledge, which included aggressive measures like buying bonds from these troubled countries, immediately eased the debt crisis.
Cramer argues that today’s global market volatility is largely the result of issues brewing at home. He views those domestic concerns as the top dog, not external distractions. Here’s why he’s worried about what’s happening today. If they do, credit rating agencies may downgrade U.S. debt, as they did back in 2011.
Cramer remarked on the alarming nature of the current economic climate, stating, “The circumstances for the U.S. in 2011 were less inflammatory than they are now.” He argues that this enhances uncertainty for investors and makes it harder to think about what the right fiscal policy should be.
The picture is as unstable as it was back then, with Cramer warning investors to be careful. He predicted that market conditions might persist in a downward trajectory, asserting, “Long story short, we need to get used to a market that’s down every morning because the earnings won’t matter in this environment.”