Safety stocks have run enough

Recession-resistant shares like Merck and ConAgra are due for a rest. Look for them to hand over the lead as the 'roving bull market' trend continues.

By Jim Cramer May 16, 2011 9:12AM

the streetjim cramerIf you didn't know any better, you'd think we are already in a housing- and credit-led recession. There's no other way to read the stock charts and think otherwise.

 

The most standout performers are the companies that can be described only as extremely recession-resistant, whether it's tobaccos or the pharmas or the medical devices or the plethora of grain-buying food companies.

 

Meanwhile, techs, oils, industrials and banks are silently rolling over and causing some real underperformance.

 

In fact, if it weren't for the terrific performance in utilities, I would just say "Look out, double dip is here." I write "if it weren't for this," because in the Great Recession we used so little energy that utility stocks came totally unglued. Now stocks like Dominion (D) and FirstEnergy (FE) -- the latter always thought to be a complete dog -- are generating tech-in-its-heyday-like performance.

At the same time, it is breathtaking to see the collapse in mineral and oil stocks. They are all rolling over in hideous fashion. Industrials are taking their time, but they are going down, too. The devastation in financials, in stocks like Morgan Stanley (MS) and Bank of America (BAC), are signaling that trading is drying up and housing is in even bigger trouble than bearish investors realize. Plus, the regulatory juggernaut that is Elizabeth Warren is going to give some real scrutiny to those showing too much return on investment in the banking group.

 

Tech? People keep focusing on Apple's (AAPL) moribund performance, but it isn't like the others are showing anything worth writing home about.

 

OK, that's all the bad news. Now let me give you some good news. The pattern with this market has been that when any group -- cyclical, noncyclical, oil, banks -- gets overbought the way a Colgate (CL) or a Merck (MRK) or ConAgra (CAG) is, there tends to be a reversion after a couple of weeks of outstanding performance. This is that "roving bull market" concept I am always talking about.

 

That would mean we are due for a sea change here after this amazing outperformance by stocks that typically don't have this kind of oomph, even as they are signaling a total collapse of the commodity markets. If commodities do not collapse, we are going to see the old trend come forward. But even if they do, I think we will see people chatter about how the soft goods are already factoring in the commodity correction.

Now, what's most amusing about this rotation to me is how out of whack it is with what's going on with the dollar. Most of these stocks thrive on a weak dollar. But they are going up anyway, perhaps as a function of lower interest rates, perhaps as a function of a recession that is lurking that I, for one, can't see.

 

Either way, I think the anti-cyclicals have run enough and it is time for them to rest. That kind of hand-off in leadership has been what's happened ever since the second leg of the bull market began last summer, and I think it is about to happen again, real soon.


Look for an intraday reversal to make it happen. That's typically how they come about.

 

At the time of publication, Cramer was long Bank of America and Apple.

 

Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

Follow Cramer's trades for his Charitable Trust.

 

Related Articles

1Comment
May 16, 2011 12:35PM
avatar
Hot Slow recoveries are very sustainable and much better than roller coasters
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

118
118 rated 1
270
270 rated 2
472
472 rated 3
714
714 rated 4
624
624 rated 5
608
608 rated 6
623
623 rated 7
445
445 rated 8
319
319 rated 9
125
125 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
BIDUBAIDU Inc10
BMYBRISTOL-MYERS SQUIBB CO.10
CELGCELGENE CORP10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.