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Jim Cramer (1:25)
Hey, I'm Kramer. Welcome to Money. Welcome to America. I don't make friends. I'm just trying to make you a little money. My job. Not just entertain, but educate, teach. So call me at 1873 CBC. Meet me at Jim Cramer. There is a titanic battle going on in this market that you may not be aware of. It barely gets any intention the war between the individual investor and the institutional investor. I think it actually might hold the key to where this market's going. Even there's A today Dow declined 166 points SB dip 0.07 Nasdaq inched up.03% Lots of people were wondering how the heck this market keep going up in response to a wave of negative news involving tariffs and trade as well as an obvious slowdown in demand for all sorts of goods and services. They think the market's irrational because it should be going down, not up. And it never should have been able to recover so swiftly after the tsunami of selling hit us after Liberation Day. It should have been a bear market, but it's not like people aren't selling at all. Bank of America's research part puts out this amazing report entitled Equity Client Flow Trends. It gives you a snapshot of what's going on with different kinds of investors within their organization, the institutions, the companies themselves in the form of buybacks, the private clients that say individuals that I think are in their buy under the title Big equity outflows led by institutions and hedge funds. This piece of research says that we just had the biggest week of selling in almost a year. Yet the S and p is up 1.7% hitting new all time high in what's going on. The sixth largest outflows week in history, many since B of A started keeping this data in 2008. I got to tell you that's incredible people. According to the report, this selling was led by institutional clients, the big guys. In fact, the institutions have been net sellers in eight of the last nine weeks. Meanwhile, corporate client buybacks slowed to the lowest Weekly level since October 2023. No up there. So why did the market go up instead of down during this period? The private clients, that's why the individual investors, you, the private clients bought as the market went higher. They've been net buyers in 28 of the last 30 weeks. No bear market there. The individual investor has not lost faith. They practically propelled us the whole way from the post Liberation day lows. They want to own stocks period. Now this is just one survey, but bank of America is probably the best cross section of people to examine. It confirms something that I've come to believe, something I'm planning to talk about when we hold our annual investing club meeting on Friday. The individual investor believes in the stock market as a way of making money. She thinks that stocks represent great real long term value. Just want to flit in and out like the institutions. She wants to use the stock market as a way to save. Right now I even say that the individual investor believes in Trump or at the very least she's not afraid that the Trump administration will somehow blow up the economy. Now that's a very different attitude from the big institutional investors who've been selling. And I think it's only going to get more pronounced. Greater gulf coming in. The one big beautiful bill act that just passed, there's a little talked about provision. Trump accounts a $1,000 benefit for newborns. Newborns. It's automatically created. You're out there doing it. The funds go to diversified stock index. Every child born in the United States between January 1, 2025 and December 31, 2028 is eligible if one parent has valid work. Eligible Social Security number. Parents can add up to 5,000 per year to the fund. And it's worth it because these accounts are tax deferred. No taxes to withdrawal. You want to take advantage of that. Now I'm not saying this amount of money can move the stock market. It can't. But look, individual investors made a fortune buy into the Incredible comeback after the Liberation Day meltdown. It seems to me that these individuals have faith in the future. They're not worried that the Trump trade policy will wreck the economy after this run. It's almost seems kind of self fulfilling, doesn't it? If the market could mount such a comeback after a very difficult moment, which was Liberation Day and against all these institutions, then why not keep buying? It's working. Okay, so now you can quibble over what these people are buying. There's a lot of money going into the high flying stock sticks. Stocks like Palantir and I told you, 50 goes to 100, 100 goes to 200. Palantir, the nuclear power stocks, anything that's tied to bitcoin, Bitcoin at all. I have been adamant that there's way too much speculation. I've been wary because we are very overbought, including tonight. But the gains have been widespread and they appear to be indicative of broader index buying. Again positive and the buying strong enough to offset selling from the so called institutional spot money. It's difficult to speculate without being too political. I do think that the previous president was not perceived as pro stock and or pro capital while President Trump is being seen as very pro business. Except for that one week after Liberation Day. I've always found the Biden observation a little odd because stocks did great under Biden. But this is about perception, not performance. So let's step back from the political world for a second and just address the commitment that individual investors have made to the stock market versus institutions, because that's what really matters. The institutional outflows are indicative of a belief that there's a whole lot going wrong. You have to presume that these money managers saw the big beautiful budget bill as inflationary. They probably hated the name too. Seems so silly. And they think it added trillions to the budget deficit. These guys are serious guys, okay? The national debt just blew it up. Meanwhile the President seems erratic. That Liberation Day was a fiasco to them. And Trump is so inconsistent that it makes owning stocks too risky. If tariff numbers are going to change every day, they seem to, hey, let's put some tariffs on copper and the President's going to bomb Iran while trashing the Fed chief, calling him too late, bad mouth, a crybaby as he did today. Well, these institutional investors think it's nuts to bank on the stock market. It's just too chaotic for them. But the individual investors don't seem to care about any of that. The individual is consistent rather than trading in and out of Stocks, they're using the market as a way to save, to get wealthy. Bonds don't have much attraction. You can't get wealthy with them. Cash is obviously regarded as a loser. So they keep investing money in the market, regardless of what's happening. So is that stupid? I contend that the stupid ones are the institutions. Why? They're too cynical, too concerned with the near term, with getting out ahead of the big one, perhaps not realizing we just had the big one after Liberation Day. The things they seem to care about. Whether the Fed will cut 1 time or 2 time or 3 time or 4 time or no time. That's all inside baseball to the individual investor. The worries about the Fed versus the President, the tradition, the Federal Reserves. Independence are crucial to the people who run the big money. But I think the stuff most goes right over the heads of the individual investors. Those silly press conferences that the Fed chairman has when he should be devoting more time to policy. I'm sure institutions trade throughout the darn thing. The individuals that even though pressures exist, they just want to buy shares of Netflix. They want to own some Nvidia. They think it's interesting to buy some Robinhood. They like what Zuckerberg is doing, so they're going to buy some Metta. Look, there's nothing wrong with the short term trading institutions are doing. But let me give you the bottom line. When I first walked down Wall street, the actual street right there, the Dow Jones Industrial Average stood about a thousand. Now it's 44,000. Perhaps the weight of evidence says you should just keep buying and just stick with it. It's been right for decades. Why should the individuals stop now? Robert in New York.