Jim Cramer, host of Mad Money, discussed Tuesday’s market action, noting that the rally following President-elect Donald Trump’s victory temporarily slowed down as Wall Street begins to assess the potential effects of broad tax cuts on the bond market. Cramer pointed out that while the stock market typically reacts positively to tax cuts, there’s a catch.
“What if the Treasury doesn’t have the money? Then just like everybody else, the government has to borrow to make up the difference and it borrows by selling bonds, trillions, trillions of dollars worth of bonds.”
READ ALSO Jim Cramer Talked About These 16 Stocks and Jim Cramer Says These 10 Stocks Can Do Well Regardless of Who Wins
Even though these tax cuts have not yet materialized, Cramer observed that the bond market seems to be sending a warning signal. He asked whether the country could face an interest rate reckoning if it borrows too much, and pointed out that this is a concern on many minds right now. Cramer continued by suggesting that perhaps investors have been too focused on the stock market rally, putting the cart before the horse, with the horse being the bond market.
Cramer acknowledged that stocks have surged since Trump’s election, but the rally has been uneven. While many investors expect tax cuts across the board—on corporate income, individual income, and capital gains—no one is exactly sure what form these cuts will take. However, it’s widely anticipated that overall taxes will be lower. Cramer noted:
“If it’s at all like 2016 when Trump first became president, the wealthy will be the biggest beneficiaries. And when rich people get more money, the theory goes they invest in stocks, create new businesses… It has always worked for the stock market.”
But Cramer warned that there’s another side to the equation: the bond market. On Tuesday, it became clear that investors in bonds were reacting nervously to the possibility of unfunded tax cuts. Interest rates surged across all maturities, signaling a shift in sentiment. Cramer emphasized that when you look at how large and fast the bond market’s move has been, it highlights a critical concern: the federal government is already borrowing trillions of dollars from the bond market, and this is happening before any tax cuts have even taken effect. He explored the possibility that this is why the bond market is responding so negatively, making it more difficult for the stock market to keep climbing at the same pace.
“If you believe we’re about to get big tax cuts, remember that somebody eventually has to pay for the missing tax receipts, as boring as that is, even if that means the government borrows a lot more money, causing bond yields to spike. We can only hope the stock market goes back to ignoring long-term interest rates or that those rates come back down in response to some benign inflation numbers.”
Jim Cramer on Shopify Inc. and Others
Our Methodology
For this article, we compiled a list of 8 stocks that were discussed by Jim Cramer during the episode of Mad Money on November 12 and listed the stocks in the order that Cramer mentioned them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8. Live Nation Entertainment, Inc. (NYSE:LYV)
Cramer highlighted how Live Nation Entertainment, Inc.’s (NYSE:LYV) stock gained after it posted its third-quarter earnings results.
“As is always the case, there are pockets of positivity that seem immune to the tug of the bond market, at least for most of the session… And Live Nation Entertainment jumped nearly 5% in the wake of some great numbers.”
Live Nation Entertainment (NYSE:LYV) is a live entertainment business that promotes music events, manages ticketing services, and sells advertising and sponsorships, while also owning and operating various entertainment venues. According to its third-quarter earnings report released on November 12, it reported revenues of $7.7 billion, with an operating income of $640 million for the period.
Through October, the company sold 144 million tickets for concerts, marking a 3% increase compared to the same period in 2023. This growth in ticket sales is part of a broader trend in consumer engagement with live events, which also includes higher spending by fans at venues. For instance, there were double-digit increases in on-site spending per fan at major festivals during Q3, which attracted over 100,000 attendees.
Additionally, at amphitheaters, there was a 9% year-to-date increase in spending for concerts by the same artists, indicating strong demand for live entertainment experiences. Ticketmaster, the ticketing arm of Live Nation Entertainment (NYSE:LYV) also saw a rise in transactions. In October, ticket sales for all events on the platform were up 15%, with concert-related ticket sales increasing by 23% over the same period. This surge reflects the ongoing strength of the live entertainment sector, particularly in the concert space.
7. Shopify Inc. (NYSE:SHOP)
Mentioning Shopify Inc. (NYSE:SHOP), Cramer said:
“As is always the case, there are pockets of positivity that seem immune to the tug of the bond market, at least for most of the session… Shopify, the e-Commerce enabler shot up 21% to a new high, in response to a magnificent quarter.”
Shopify (NYSE:SHOP) is a leading e-commerce platform that helps merchants manage and sell products across a variety of channels. In the third quarter, the company posted a net income of $344 million on total revenue of $2.16 billion, reflecting a 26.3% year-over-year increase in sales. Net income nearly doubled, rising from $173 million in the same period last year to $344 million, driven by gains from equity investments.
For the fourth quarter, the company expects sales growth to be in the mid-to-high 20s percentage range year-over-year. The company also anticipates that its gross profit for the period will continue to grow at a pace similar to the 24% increase seen in the third quarter. Additionally, management expects the company’s free cash flow margin to be in line with last year’s figures for the same quarter.
Shopify (NYSE:SHOP) is also focused on maintaining its global expansion strategy. The company aims to capitalize on the versatility of its platform and the wide range of solutions it offers to merchants in order to capture a larger share of the growing e-commerce market.
