Stockowners have been hit with a new syndrome and it’s causing U.S. major markets to descend after a strong start to 2019, CNBC’s Jim Cramer said Wednesday.
And the new phenomenon has taken the place of FOMO, or fear of missing out on stocks going higher, he added.
“Boy, those were the days. We sure don’t have FOMO anymore, do we? Instead, after another ugly session … we’ve got FOBS, fear of big sellers,” the “Mad Money” host said. “And that FOBS is putting pressure on the whole market.”
In Wednesday’s session the Dow Jones Industrial Average lost about 133 points, the S&P 500 declined 0.65 percent, and the tech-heavy Nasdaq fell less than 1 percent. The Dow Jones and S&P recorded their sixth negative closes in seven, while the Nasdaq had its fourth in five.
Since the cold decline in December, the market recovered those losses and added more during the hot rally the last two months. Now FOBS is driving big institutions to sell at current levels to protect gains, Cramer said.
Stock prices are so high that funds are making moves to get ahead of the competition in fear that there won’t be enough buyers, he said.
“Managing money in this kind of environment is a little like going hiking with your friends and then getting attacked by a bear. You don’t need to outrun the bear to get away unscathed, you just need to outrun your friends,” Cramer said. “The market’s run up so much over the past couple of months that there are plenty of money managers [who] simply want to take profits. Big profits they’ve got them, and they don’t want those big gains to go away.”
Cramer said such action can be found in semiconductors where nothing is really wrong with the stocks except that they ran too high.
He also pointed to General Electric, whose stock took a dive after its Tuesday conference call. The new CEO Larry Culp said industrial free cash flow will be negative in 2019 and that he expects the troubled power business to perform worse than it did in 2018.
The stock fell 4.7 percent after the call and nearly 8 percent Wednesday. Earlier in the day, Cramer, who has faith in Culp, said the conference call was “really sobering.”
“GE was vulnerable because the stock had rallied so far so fast up 54 percent from the bottom before today,” he said. “So you had plenty of investors who simply wanted to ring the register before the big institutional shareholders started selling once they realized that 2019 would be a real bummer of a year.”
Cramer also said FOBS has hit the drugs and cloud stocks. Shares of Workday went down despite reporting a “amazing” quarter last week, which he said was a “signal to hedge fund managers that it was time to start fearing their fellow investors.”
“Right now there’s no fear of missing out in this market. It’s all about fear of big sellers, which is why, for the moment, things are looking pretty ugly,” Cramer said.