Here's why I'm pounding the table for stocks in this Trump-driven market sell-off

Published Thu, Mar 13 20251:00 PM EDT

I am all fired up and brimming with enthusiasm for some of our Investing Club stocks that are finally off their highs, which allows me to pound the table like I haven't been able to for quite a long time. But first, let's set the scene. Right now, we have what seems like the worst of all possible worlds: a president lashing out seemingly on a daily basis, telling our trading partners that it is time to pay the piper. The lash-out is making people very nervous, which is reflected in the incredible collapse in retail stocks — many of which I now think are going to miss their numbers. At the same time, the Federal Reserve appears to be on hold because there is still enough inflation to justify not cutting rates. Used cars, rent, travel, apparel, and medical are relentlessly going higher even as the latest readings on consumer and wholesale inflation were fairly tame. That combination seems to be a recipe for recession. But, if you are in stocks, or at least in the right stocks, it is not the worst of all possible worlds. In fact, it is developing into the opposite, an actual dynamic world where many stocks make a great deal of sense to own. First, we must recognize that if we get a recession, it is one that is being mistakenly manufactured by President Donald Trump who has not explained well why he cares about tariffs so much. He talks as if the federal government could raise a lot of money from tariffs but that's not at all clear. People in this country will just not buy the tariffed product. They will opt for something else. To be sure, the U.S. has been ripped off for years by our trading partners. But they don't buy much from us anyway, so it is all pretty one-sided. Almost none of our businesses will be hurt by any trading partner retaliation against us because they never let us in anyway and they never will. Unfortunately, again, all of this has been done without much thought. The one country that can really hurt us is Canada. Almost every other country in the world doesn't buy much of our goods because of hefty tariffs, which is why Jack Daniels and Levi's jeans get taxed. It's that unfair and meaningless to our companies. So, after Canada, things will actually be better as the only items that will go up are autos. Autos, however, matter. The U.S. carmakers employ a huge number of people and have been systematically discriminated against overseas. Foreign cars have a free ride here as they pay a de minimis tariff, a good example of why mindless free trading is so unfair. More than 50% of our cars sold here are foreign-made. Presumably a 25% auto tariff, delayed a month, will drive up prices for all cars. But they will probably be too high, and they won't sell. Used cars will go up in price. It's not good but I think it is the worst-case scenario, and we will get by it. Here's where we will thread the needle. We know food costs are going down. The travel bull market seems over. That's all going the Fed's way. Autos could languish and ultimately come down in price as buyers switch to used cars. The retailers are getting very promotional as you can tell if you look at the stock prices for Target , Walmart , Dick's , and Kohl's . I can't think of a way to get medical costs down. But rent can come down as prices have been distorted by immigration — and immigration, legal or more important, illegal, seems to have really dropped hard. Meanwhile, lots of new construction of apartment buildings that were put on hold because of Covid are now coming online. A lack of immigration and new rentals will, at last, knock rent down. Another benefit: Gasoline will soon come down with the price of oil. It's going our way. So, coming full circle, we have a mistakenly manufactured downturn by Trump that will soon run its course when he goes after the last bastion: foreign autos — those from Germany, Japan, and Korea. Then he's done; there will be nothing more to tariff of any consequence. At the same time, with these lowered prices for goods and services, we will be set up to have multiple Fed rate cuts. No wonder all the safety stocks are getting crushed; glad we sold some Abbott Labs and some Bristol Myers Squibb . These stocks, after going parabolic, aren't finished with their descents. Of course, our president is capable of anything, but I would say we are suffering through the worst of what we are going to get because the market has priced in a lot more tariffs. We will give up these gains if Trump announces the German, Japan, and Korean tariffs right out of the blue. But I do not except to see dramatic lows from here — maybe no more than a 4% to 5% decline because, again, there can be no retaliation because our trading partners don't have anything to tariff. They have been that protectionist; they have been that greedy. Sure, the Fed may decide that the decline in inflation still isn't good enough. But the odds favor winning on spending declines from fear or on the declines in prices because of a peaking of inflation. The biggest risk is earnings, which will then come down to stock selection. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. 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A car hauler heads to cross the Ambassador Bridge between Windsor, Canada and Detroit, Michigan on the first day of President Donald Trump's new 25% tariffs on goods from Canada and Mexico on March 4, 2025 in Windsor, Canada.

Bill Pugliano | Getty Images