Jim Cramer: Stock moves mark the end of ‘tyranny of the index funds’

After a down day for shares in Wednesday’s session, CNBC’s Jim Cramer mentioned the market is giving traders an opportunity to purchase particular person shares now that Wall Street has damaged away from the “tyranny of the index funds.”

“There’s been a move to own individual stocks led by younger, often novice investors who’ve been captivated by a world of commission-free trading,” the “Mad Money” host mentioned. “It took me a little while to realize it, but the no-commissions — it’s been revolutionary.”

The feedback got here after shares traded decrease for the second day in a row, with the Dow and S&P 500 pulling again from file ranges as state and native governments put new restrictions in place to mitigate the second wave of the coronavirus and researchers continued to publish optimistic outcomes from late-stage vaccine trials.

The Dow declined nearly 345 factors, or 1.2%, to 29,438.42. The S&P 500 additionally declined 1.2% to three,567.79, whereas the Nasdaq Composite misplaced 0.8% to shut at 11,801.60. All indexes completed close to their session lows.

“Today we saw the power of positive thinking,” Cramer mentioned. “When the market goes down like this … there’s only one thought that’s running through investors’ minds: Good, now I get a chance to buy.”

Cramer took a second to hail particular person inventory shopping for over the widespread apply of shopping for index funds, attributing the revived curiosity in inventory choosing to the invention of commission-free buying and selling, which will not eat right into a portfolio’s good points. The elevated exercise in inventory shopping for limits the affect of the S&P futures and returns focus to an organization’s fundamentals, he mentioned.

“It’s a return to the old days when management’s execution really mattered,” Cramer mentioned. “Every day, we see individual stocks on the move because the underlying businesses are thriving.”

He pointed to the ongoing good points being made in shares similar to Zoom Video, which has been a darling of a distant financial system bolstered by a tradition of social distancing amid the pandemic. Tesla, Lordstown Motors and Fisker are the widespread picks amongst traders in search of publicity to electrical automobiles, whereas Ford and General Motors are being traded on a booming auto market, he mentioned.

The journey performs, significantly cruise strains and airways, have been the go-to picks on vaccine progress, Cramer mentioned. He highlighted Qualcomm as a 5G play and pointed to Target and Costco for retail investments.

“Now that we’ve beaten what I call the tyranny of the index funds, the market no longer marches in lockstep as it used to,” he mentioned.

“As long as interest rates stay extremely low and individuals don’t get brainwashed anymore into believing they’re too dumb to pick stocks, you’re going to get more days like today where disparate groups move in opposite directions,” he mentioned.

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