"It was the same during the dot-com crash"...Jim Cramer warns of oversupply in US stock market

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US President Donald Trump's hawkish remarks on Iran rattled the New York stock market. However, Jim Cramer pointed to an oversupply of stocks and bonds flooding the market as a greater risk than the Strait of Hormuz.

Jim Cramer, host of CNBC's "Mad Money," stated on the July 9 (local time) broadcast that investor anxiety increased after Trump's remarks suggested he might break the truce with Iran and take a hardline stance. He explained that Iran's repeated attacks on ships passing through the Strait of Hormuz despite the truce have made Trump's future response uncertain.

The New York stock market also fluctuated. The Dow Jones Industrial Average plummeted 577 points, and the S&P 500 index fell by 0.28%. The Nasdaq Composite index, however, overcame early weakness to close up 0.2%. Cramer noted that in the past, Middle East tensions led to rising oil prices, but the larger repercussions to overturn the market were limited.

Trump's hawkish remarks dragged down interest-rate-sensitive consumer stocks. The rotation into food and pharmaceutical stocks also stalled, and travel, leisure, and aerospace stocks were hit. Cramer emphasized that while Trump's remarks are important in the short term, there is a separate, more concerning issue in the stock market.

The risk Cramer warned about is the flood of new stocks and bonds into the market. He stated that large new issues are absorbing available capital, adding, "If there's more supply of stocks than the market can handle, it can end any bull market." He further warned that if issuing companies and investment banks do not reduce supply, the bull market, recently hit especially in technology stocks, could be further shaken.

Cramer explained that if the market's supply and demand balance collapses, it can escalate into an irreversible oversupply, and the same phenomenon occurred during the dot-com bubble crash. However, he drew the line, saying, "We haven't reached that stage yet," and "It doesn't mean you should get out of the market right now." The current assessment is that the market has so far been absorbing new supply despite Trump's successive hawkish remarks.

[Article Key Summary]

-Jim Cramer identified the flood of new stocks and bond supply into the market as a greater stock market risk than Trump's hawkish remarks on Iran.

-The Dow Jones Industrial Average plummeted 577 points, and interest-rate-sensitive consumer stocks, along with travel, leisure, and aerospace stocks, were also hit.

-While Cramer warned that oversupply could collapse the bull market, he did not see the current situation as an immediate signal to exit the market.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*