Jim Cramer says investors are powering the December rally with conflicting bets

With the so-called “Santa Claus rally” in mid-swing, CNBC’s Jim Cramer on Tuesday said investors are making conflicting bets on stocks in contrast to December rallies in years past.

The stock market tends to rally in December heading into the Christmas holiday, but the 2020 year-end increase is being powered by conflicting forces, with everything in play on Wall Street, he said.

“With a vaccine glut on the horizon, at-home testing [and] the possibility of a stimulus deal in Washington, all the while the Fed holds down rates,” the “Mad Money” host said, “I’d worry not being bullish enough.”

The comments come after the major stock averages all marched more than 1% in Tuesday’s session, snapping a four-day losing streak in the S&P 500. Despite the consecutive daily declines, the benchmark index is up 2% to 3,694.62 so far in the month of December. By comparison month to date, the blue-chip Dow Jones has climbed 1.89% to 30,1991.31 and the Nasdaq Composite rallied 3.25% to 12,595.06 as of the close.

Tuesday’s positive trading was powered by renewed stimulus spending optimism in Washington, D.C. and an Apple announcement about a ramp-up in iPhone production that buoyed the broader market.

Cramer said investors paid up for stocks during the session along multiple themes, such as economic reopening hopes emanating from the Covid-19 vaccine front and business shutdown warnings due to worsening coronavirus spread. Some investors are also putting money into non-essential retail stocks, betting on a no-lockdown scenario, he added.

In this environment, Cramer recommends buying stocks of tech and select retail, industrials and travel companies.

“Right now, we have bets being made from all different directions, contradictory bets that are sticky that don’t make any sense when you put them all together,” Cramer said. “Sooner or later, someone has to be wrong.

“For the moment, though, Christmas joy abounds, the Santa Claus rally continues and Wall Street gamblers move up their favorite stocks with their buying.”

Disclosure: Cramer’s charitable trust owns shares of Apple.

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