During the dotcom bubble of the 2000s, stocks fell by around 50%. However, in the middle, there were small bounces of between 10% and 20% or so. The same thing happened in 2008 during the subprime crisis: shares fell about 58%, but the negative trend had some stages of slight growth.
In this line, Jim Cramerthe former hedge fund manager and current host of Mad Money, the CNBCindicated What are the factors that must occur for there to be rebounds in the current crisis? that exists for fear of a recession.
“I am one of the few people who really believe that we could have a full bull market within a bear market situation, but only if we get some specific signals”said the specialist.
Subsequently, he argued that, first, oil prices should stabilize at levels beneficial to producers and the public. Currently, the raw material is trading at around USD 105 per barrel, values not seen since mid-May.
On the other hand, Cramer emphasized that runaway food inflation must end. In May, in the United States, prices in this sector grew at a rate of 10% year-on-year.
Also, for there to be a bullish bounce in the current bear market, unemployment rates should rise to 5% for a couple of quarters. In this way, the demand would be reduced and there would be a “breather in the fight against inflation”according to the host of Mad Money.
Likewise, investors should stop engaging in short-term speculative trading, betting both on the decline of certain assets and the rise of small companies. Doing so would reduce volatility.
In turn, Jim Cramer believes that the forward-reverse indicator, which measures how many stocks are up relative to how many are down, should grow steadilysince it is a “solid precursor” of a bullish rally, at least in the short term.
Finally, it is important to observe the situation of mergers and acquisitions of large companies. The expert believes that the more established ones have to join the newer companies and “trash”.