Jim Cramer: China trade is a 'much smaller' market issue than most may realize

CNBC’s Jim Cramer on Tuesday offered some advice that could be soothing for investors after the stock market sold off on doubts that the U.S. and China would soon land a trade agreement.

“If the trade war were really all-important, the averages would never have been able to surge to record levels over and over and over again,” the “Mad Money” host said. “As tense as the negotiations may be, China’s simply a much smaller issue than most people seem to realize.”

Earlier in the day President Donald Trump said he was willing to postpone signing a trade deal with Beijing until after the 2020 election. The major averages all tanked more than 1.4% to their session lows before recovering some of those losses. The Dow Jones Industrial Average finished the trading day at 27,502.81, down about 280.23 points, while the S&P 500 traded 0.66% lower and the Nasdaq Composite settled 0.55% under.

“The market is slow to figure out the positives, very fast to identify any negatives from the trade war, which is why we have days like today,” Cramer said. “Unfortunately, I think we could have a lot more faux … trade-related pain before we’re ready for some gain.”

Investors must remember that “not everything hinges on trade,” Cramer said. He laid out the following reasons he thinks some bright spots remain in the market:

  1. The U.S. economy is largely service-oriented and is “pretty darned close to full employment.”
  2. The trade dispute does not affect the “powerful secular trends” of digitization and medical innovation.
  3. Tariffs cause bond prices to go up and yields to go down, which translates into more investments into high-dividend stocks.
  4. Retailers that have scale, such as those in Cramer’s WATCH group, can push suppliers to keep prices down.
  5. The indexes are less reliant on industrial stocks, which means “tariffs can’t hurt us as badly as you might think.”

Cramer suggested that investors take a wait-and-see approach to the market as technology companies such as Apple are still leveraged to China’s economy. Eventually, the stocks that are detached from China will rebound, he said.

“Nevertheless, much of tech keeps getting slammed, and that’s the real issue we face right now,” Cramer said. “While I think that will eventually create fabulous discounts, we’re not totally there yet.”

Disclosure: Cramer’s charitable trust owns shares of Apple.

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