CNBC’s Jim Cramer isn’t exactly bullish about the tidal wave of earnings coming in July.
“As we head into earnings season next month, there are three things that really worry me,” the “Mad Money” host said Friday.
“One, slowing revenues from the end — or at least the pause — [of] the synchronized global economic expansion. Two, the stronger dollar, which is a very different story from the last quarter and is really bad news for American exports. And three, rising raw costs from tariffs and, more important, higher oil prices,” he said.
Let’s take them one by one.
1. End of expansion
Earlier on Friday, Cramer called on the Trump administration to speed up its fair-trade fight with the rest of the world, most notably China, the European Union, Canada and Mexico.
“You just need it be done within the next three to six months because the world [economy] is slowing too quickly,” he said on CNBC’s “Squawk on the Street,” just before President Donald Trump tweeted a threat to place tariffs on European cars.
While Cramer maintained that Trump would likely win the fight, he worried about the impact escalating trade disputes — or even worries about them — could have on the world economy, which he suggested is nearing the end of its synchronized expansion cycle.
“I think it’s crazy that we rallied on today’s news flow. We should’ve gone down,” Cramer said. “We’re going into a weekend where there will be tons of trade tensions and the president seems to be content to let them brew. This is not a recipe for a rally, people.”
2. Strong dollar
While the U.S. dollar ticked down slightly on Friday versus currencies tied to commodities and emerging markets, its overall strength was also concerning for the “Mad Money” host.
What does that have to do with earnings? When the dollar strengthens versus other currencies, companies that do business overseas are typically forced to cut their forward-looking estimates because foreign earnings get translated into fewer dollars.
For U.S.-based companies, that typically means squeezed margins, dimmer guidance and sinking stocks.
“The inputs point South, not North,” Cramer said. “I think the drivers have the wrong directions — maybe they turned the map upside down — and if you’re going along for the ride, you need to know that the navigation is very, very off.”
3. Oil
Oil prices rose dramatically on Friday after an Organization of the Petroleum Exporting Countries meeting resulted in a smaller boost in oil production than the world’s producers were expecting.
While it wasn’t immediately clear by how much OPEC would raise its output, Trump tweeted that he hoped it would increase production “substantially” to keep prices down.
“Somehow, the stock market bulls were cheered by higher oil, which is just plain stupid,” Cramer said. “I shouldn’t have to spell this stuff out, but higher oil prices are bad for the economy and bad for the stock market long term.”
“From these heights, come on. Any stock market bull should want oil lower,” the “Mad Money” host continued. “People are already fretting about rising raw costs — this just makes the problem worse.”
Final thoughts
All in all, Cramer couldn’t understand why bulls came out of the woodwork on Friday to buy into what looked like a concerning layout.
“The only thing that the bulls really had going for them is that we were getting oversold and the the Dow [Jones Industrial Average] had been down for eight straight days,” he said.
“If you’re a bull here, you should want to see oil down, some conciliatory attitude toward tariffs, and less incendiary language from the White House,” Cramer continued. “Until we get these things, I simply can’t be as sanguine as I’d like about the market, … even as I feel lonely being circumspect on a day like this one.”