CNBC’s Jim Cramer is one of our favorite contrarian indicators to gauge the market’s sentiment due to his unblemished track record of consistently parroting the consensus opinion – a practice that rarely generates any market-beating returns. Just consider the stellar year-to-date performance of the Inverse Cramer ETF to gauge the attractiveness of flipping Jim Cramer’s recommendations.
— Inverse Cramer ETF (Not Jim Cramer) (@CramerTracker) August 30, 2022 Consider the fact that Jim Cramer recently exhorted people to buy the dip in the market just as the Federal Reserve was doubling down on its hawkish stance at its Jackson Hole symposium.
Historically, September has been challenging for the S&P 500 in midterm election years👉 https://t.co/yIk7SZYp6p h/t @jpmorgan #markets #seasonality #assetallocation #returns#equities #sp500 #spx $spy $spx #stockmarket #investing #stocks pic.twitter.com/X26b4sM7b3 — ISABELNET (@ISABELNET_SA) September 7, 2022 Given the fact that September has historically been a challenging period for US equities in an election year, Cramer’s recommendation, unsurprisingly, has yielded negative results. Moving ahead, please note that we will base our analysis today on the Inverse Cramer ETF constructed by IndexOne due to its superior fidelity relative to other similar offerings in the market. Index One’s Inverse Cramer ETF is based on the tweets by the Twitter account @CramerTracker. Currently, this ETF’s major long positions include Enphase Energy (NASDAQ:ENPH) and Annaly Capital Management (NYSE:NLY). On the other hand, its major short positions include Okta (NASDAQ:OKTA), NRG Energy (NYSE:NRG), Science Applications International Corp. (NYSE:SAIC), Target (NYSE:TGT), and Snowflake (NYSE:SNOW). This brings us to the crux of the matter. As is evident from the above snippet, Index One’s Inverse Cramer ETF is currently offering a year-to-date return of -2 percent. For comparison, the benchmark S&P 500 index is currently down over 18 percent so far this year. This means that the ETF is beating the broader market by a whopping 16 percent. When we last wrote on this topic, the Inverse Cramer ETF offered by IndexOne had a Sharpe ratio of -0.21 on a year-to-date basis. As a refresher, the Sharpe ratio measures the excess return that a portfolio generates, normalized by its volatility. The ETF’s Sharpe ratio of -0.21 at the time suggested that it would have failed to beat the risk-free rate of return (the return offered by US Treasuries). However, in an encouraging development, IndexOne’s anti-Cramer ETF now has a Sharpe ratio of 0.15. While still not stellar, at least this portfolio now offers a growing probability of matching the risk-free rate of return offered by the US Treasuries.
