Financial guru and the host of CNBC's 'Mad Money' show, Jim Cramer, believes that the US market tipped its hand on Tuesday as stocks rallied hard while Treasury yields declined on the hope that the US-Iran war will end soon.
Cramer described yesterday's market rally as a 'dry run of what will ultimately occur.' US equity indexes surged by over 2% after multiple media outlets, including The Wall Street Journal and the New York Post, reported that President Donald Trump informed aides that the US is willing to end military operations in Iran even if the Strait of Hormuz remains largely shut.
These speculations follow an unconfirmed report that the Iranian President said he is open to ending the conflict only if multiple security guarantees are met.
'Today we saw what would happen when you give peace a chance. Maybe this dialogue with Iran is really nothing more than an exchange of messages. Maybe it's meaningless. So, consider today a dry run of what will ultimately occur when the war winds down,' Cramer said.
Cramer Forecasts Changes in Market Dynamics After the War
Cramer believes US markets will shift in three ways after the war, starting with a decline in rates, which would be a considerable reversal for the 10-year Treasury yields since the onset of the Middle East conflict a month ago.
The yield on the benchmark 10-year Treasury note influences borrowing costs across the economy. It has surged in recent weeks due to elevated inflation risks stemming from higher oil and energy costs, as well as lower odds of the US Federal Reserve cutting interest rates in 2026.
'They [will] go down noticeably,' said Cramer on rates. 'They go down because we now realise that there's a huge amount of inflation stemming from the war. Not just from oil going higher – we saw that at the pump – but from the ancillary products that came out of the Gulf: fertiliser, polyethene, and aluminium.'
'We didn't know going into the war that our farmers were gonna need to raise prices for us because the price of fertiliser would go much higher. You allow the fertiliser to come back down, you stop the pernicious food inflation,' he added.
Secondly, Cramer forecasts a major rebound in growth stocks after Nvidia and Marvell shares surged by 5% and 13%, respectively, on Tuesday.
Once rates decline, Cramer believes investors can focus on what high-growth companies are doing right without the hindrance of the Middle East conflict. He also highlighted a new collaboration between AI giants, including Nvidia's $2 billion stake in Marvell.
'Money managers believe that price-to-earnings multiples — how much we'll pay for a company's earnings – have been horribly compressed by the war. If the war's over, we'll start paying more for the stocks of companies that were never gonna skip a beat to begin with,' Cramer added.
Lastly, Cramer predicted a major rally of US bank stocks. While the war has raised concerns that Wall Street dealmaking will decline, the financial sector should benefit from the end of the conflict, which should pave the way for more deals. Banking stocks like Goldman Sachs and Morgan Stanley gained 5% and 4%, respectively, during Tuesday's session.
Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.
