CNBC's Jim Cramer gave some advice on Tuesday that could be reassuring for investors after the stock market sold in doubt that the US and China would soon reach a trade deal.
"If the trade war were really crucial, the averages would never have been able to reach new highs over and over again," said Mad Money's host. "As tense as the negotiations may be, China is simply a much smaller problem than most people seem to recognize."
Earlier, President Donald Trump had said he was ready to delay signing a trade agreement with Beijing until after the 2020 elections. The main averages all reached their session lows by more than 1.4% before some of these losses were made up. The Dow Jones Industrial Average closed the trading day at 27,502.81, down 280.23 points, while the S&P 500 fell 0.66% and the Nasdaq Composite fell 0.55%.
"The market is slow to find the positive aspects, and the negative aspects of the trade war can be identified very quickly. That's why we have days like today," said Cramer. "Unfortunately, I think we could have a lot more faux … trade-related pain before we're ready to gain anything."
Investors have to remember that "not everything depends on trading," said Cramer. He cited the following reasons, which in his opinion leave some bright spots on the market:
- The US economy is largely service-oriented and "almost fully employed".
- The trade dispute does not concern the "strong secular trends" of digitization and medical innovation.
- The tariffs lead to an increase in bond prices and a decrease in yields, which leads to more investments in high-dividend stocks.
- Retailers such as the Cramer WATCH Group can urge their suppliers to keep prices low.
- The indices are less dependent on industrials, which means that "tariffs cannot do us as much damage as you might think".
Cramer suggested investors should wait and see the market as technology companies like Apple continue to benefit the Chinese economy. Eventually, the stocks detached from China will recover, he said.
"Even so, a lot of the technology is being hit again and again, and that's the real problem we're currently facing," said Cramer. "Although I think this will eventually lead to fabulous discounts, we're not quite there yet."
Disclosure: Cramer's non-profit foundation owns shares in Apple.