Jim Cramer on Monday looked at how the market could expand in the new year, saying that fewer restrictions on mergers and acquisitions from the Federal Trade Commission could help spread the wealth beyond high-flying tech stocks.
“Mergers and acquisitions could be the potential saviour for much of this market, from medical devices to industrials to retailers, aerospace, utilities, food and drugs and so many other groups,” he said. “Right now, though, the FTC has been really strong about blocking everything, trying to block every deal that comes their way, sometimes just to hold them up before a judge lets them through, and sometimes successfully just shooting them down.”
Cramer acknowledged that it has been a tough year for stocks outside of the Magnificent Seven, whose success has outshone most other sectors. The seven Nasdaq stocks are Alphabet, Apple, Amazon, Meta, Microsoft, Nvidia and Tesla.
He said he wasn’t sure that this dynamic could change in the new year, adding that either the “Magnificent Seven” need to “stop doing so many things right” or the others need to “stop doing so many things wrong”.
Cramer said that the potential solution for the rest of the market isn’t necessarily to challenge the “Magnificent Seven”, but to change the percentage gains of other companies. Instead, Cramer suggested that mergers could lead to big gains in a number of different sectors.
According to Cramer, pharmaceutical companies could see better and more profitable products if they merge or acquire biotech companies. Food companies need to merge to cut costs, he added, claiming that these deals won’t lead to higher prices for consumers. Cramer also said that bank mergers could lead to gains for both the target and the acquirer, as there are currently too many banks to regulate well.
“If you want to see the rest of the market go higher, all President [Joe] Biden needs to do is replace his FTC chairwoman, Lina Khan,” Cramer said. “But given his pro-labor stance and the fact that mergers often lead to layoffs, I doubt he’ll go there. Then again, nobody stays in these jobs forever, so you never know.”
