While the S&P 500 index has slid 3.5 percent from last month's record high, that's no reason to panic, says CNBC commentator Jim Cramer
"It's worth going over why people are selling stocks, and why I can't blame anyone for wanting out, even though there's nothing truly earth-shattering happening — nothing that would make me want to yell 'fire' in a crowded theater," he said on his "Mad Money" show.
Stocks are suffering from the dollar's surge and expectations that the Federal Reserve will raise interest rates around mid-year, Cramer explained. The dollar has hit multi-year highs against a range of currencies in recent weeks.
As for the Fed, talk of a rate hike intensified after Friday's strong jobs report for February.
"So, considering all of those negatives, how come I'm not yelling 'fire'? One simple reason: we don't have systemic risk. We aren't about to fall apart at the seams," Cramer proclaimed.
"Our banking system is well-capitalized, perhaps the best it's ever been. The consumer is healthier than any time in my lifetime, thanks to a strong job market, lower energy prices and an aversion to debt because of the Great Recession," he explained.
"If you're selling everything now, you're taking a meat axe to your portfolio when you need perhaps a scaffold or even a knife to trim back the small percentage of stocks belonging to companies whose earnings are at risk if interest rates go higher and it is by no means certain rates are going to spike here, especially given how low rates are in Europe right now."
Star mutual fund manager John Hussman
, president of Hussman Investment Trust, doesn't share Cramer's equanimity toward stocks.
"We continue to observe one of the most overvalued, overbought, overbullish syndromes in the historical record, combined — and this feature is central — with deterioration in market internals suggestive of a shift toward risk-averse preferences among investors," he wrote in his weekly market commentary.
"The resulting combination places current conditions among instances that we identify as a 'Who’s Who of Awful times to Invest.' . . . We continue to view the stock market as vulnerable to significant downside risk both in the near-term and over the completion of the present market cycle."
Stocks have soared over the past six years, with the S&P 500 index tripling since 2009.
The index carries a trailing price-earnings ratio of 18.6, almost a five-year high and well above the 16.9 average since 1936, according to Bloomberg and S&P Dow Jones Indices.
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