On a very bullish day for the broader stock market, the declines inside retail sector were speaking volumes to CNBC’s Jim Cramer.
With the trade dispute between the United States along with China heating up, the “Mad Money” host figured the weakness stemmed coming from “a belief which the retailers will have to eat the tariffs, meaning they can’t pass on all the cost increases to consumers.”
“Not only which, yet Amazon could always undercut any company which makes goods in China along with sells them here,” he said on Thursday.
The retail stocks’ dip came after the United States along with China exchanged tariffs on each various other’s goods earlier which week. On Thursday, the Chinese commerce ministry said which hoped the United States might correct its behavior inside trade dispute.
yet given how vocal leaders inside retail space have been about the unfavorable effects of tariffs on their businesses — along with Amazon’s growing pricing power — Cramer wondered if they might take the brunt of the trade war’s negative effects.
“A combination of the competition coming from the retail Death Star, along with either higher prices or higher costs caused by tariffs, could very well mean which the department stores can’t make their numbers,” he said. “which’s why the stocks were shelled. Makes sense.”
Cramer also did some quick math to back up his point. If President Donald Trump follows through with his plan to raise tariffs to 25 percent coming from 10 percent by the end of 2018 along with all of the costs get passed down to consumers, which works out to roughly $1,000 per family per year.
“Not ideal,” he admitted, “yet which’s also highly unlikely. If the tariffs genuinely were going to fall entirely on the heads of consumers, the retail stocks wouldn’t have had such a mess today. Plus, we did just get a tax cut [which] more than makes up for the tariff figure every time I do the numbers.”
“currently, which may just be one big rotation out of growth into value, with people selling the expensive stocks along with swapping into stocks which sell at a discount to the S&P 500,” the “Mad Money” host said. “yet the bottom line will be which’s a far more sustainable rally than the various other way around.”
Shares of the SPDR S&P Retail ETF, comprised of retail stocks including Nordstrom, Wayfair along with Supervalu, were up a modest 0.33 percent at the end of Thursday’s trading session. Department store stocks Macy’s along with Kohl’s sank 1.04 along with 3.23 percent, respectively, into the close.
Retail industry experts have warned which tariff escalation could squeeze American consumers, pushing prices higher along with sales lower. In June, the CEO of the National Retail Federation told CNBC which tariffs might likely “erase” the positive effects brought on by tax reform.