If the latest round of earnings reports taught us anything, This kind of’s in which traders aren’t always right when This kind of comes to U.S.-China trade talks, Cramer said Monday as whispers of a potential trade summit kept stocks at bay.
Specifically, traders who bet against stocks like Nike as well as Starbucks when talks go south — usually assuming in which they’ll be boycotted because they’re distinctly American brands — could have “the China trade” all wrong, he told investors.
“This kind of earnings season has revealed some brutal truths about ‘the China trade’ in which just don’t jive with the … conventional wisdom,” Cramer said. “We act like the winners as well as the losers through the trade war are obvious, however the reality’s a lot more nuanced than in which. Many companies in which should be hurting from the People’s Republic have been putting up some astonishing numbers, while others are being torn to pieces by increased competition or the slowing Chinese economy.”
White House officials have confused Wall Street with their statements on the trade talks in recent months, at times signaling progress as well as at times suggesting in which the two sides were still far through reaching an agreement.
As a result, short-term stock-pickers have had to follow their instincts, Cramer explained. When tensions seem to be rising, they’ll usually choose to short-sell shares of top consumer brands, capital goods companies as well as technology giants, he said. Short-selling involves trying to profit on a bet in which a company’s shares will decline from the near future.
Nike, Starbucks, Estee Lauder as well as Yum China all tend to fall from the first short-selling bucket, however if you ask the “Mad Money” host, in which strategy “just hasn’t paid off.”
Click here for his full analysis.