So, what happens to the stock market when a war ends? According to CNBC's Jim Cramer, we might have gotten a sneak peek on Tuesday.
The "Mad Money" host called the day's big rally a "dry run" for what could happen if the U.S.-Iran conflict finally winds down. With the S&P 500 up 2.91% and the Nasdaq Composite jumping 3.83% on news hinting at Middle East de-escalation, Cramer thinks investors were testing the waters for a post-war world. And he has a pretty clear vision of what that world looks like, built around three major market shifts.
First up: interest rates. Cramer foresees a drop in rates, which would be a significant reversal for the 10-year Treasury yield since the war began. The logic here is that the market would finally recognize that a big chunk of inflation risk came from the conflict itself. It's not just about oil prices spiking; it's about the war disrupting all sorts of ancillary products flowing from the Gulf region. Peace could mean those supply chain pressures ease, giving the Federal Reserve more room to maneuver.
Second, get ready for growth stocks to make a comeback. Cramer points to Tuesday's action as Exhibit A: Nvidia (NVDA) closed 5.9% higher and Marvell Technology (MRVL) soared 12.8%. His theory is simple. If rates start to fall, investors can stop worrying so much about geopolitics and refocus on what these high-growth companies are actually doing. Speaking of doing things, Marvell's jump wasn't just about the broader market mood. The company also announced a strategic AI partnership with Nvidia, integrating its tech into Nvidia's AI factory and AI-RAN ecosystem. The goal? To offer more flexible next-generation AI infrastructure. When rates fall and innovation stories get hot again, this is the kind of stock that could run.
Finally, Cramer is betting on a rally in the big banks. These stocks have been weighed down by fears that war uncertainty would freeze Wall Street's dealmaking engine. But look at Tuesday: Goldman Sachs (GS) advanced 4.75% and Morgan Stanley (MS) gained 3.91%. Cramer sees those moves as a precursor. If the war ends, the worry holding back mergers, acquisitions, and IPOs could lift, and that's pure oxygen for investment banking revenues.
