CNBC's Jim Cramer: Cantor's Exit Brings Back Fear of Washington

Thursday, 12 Jun 2014 11:22 AM

By Michael Kling

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With U.S. Rep. Eric Cantor stepping down as House majority leader, fears that politics will send stock markets crashing have returned, says CNBC's "Mad Money" host Jim Cramer.

In a shocking upset, Cantor, a Virginia Republican, lost to primary challenger David Brat, a Tea Party-backed college professor and political newcomer. As House majority leader, Cantor helped forge spending agreements and budget ceiling agreements. He said he will step down from the leadership post as of July 31, before his term ends.

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With his departure, uncertainty over Republican leadership and the potential for political deadlocks and a Tea Party resurgence increase.

"The surprise won't be over in a day," Cramer says. "Once Washington gets on the front page of the business papers it doesn't come off easily."

"Every gut-wrenching, bone-crushing selloff of more than 5 percent has been caused by Washington, either because the government did something terrible or because people were worried that it might do something horrible," he says.

Cantor's defeat, he says, stunned those who thought Republicans were moving to the center. Another bruising debt-ceiling standoff is possible. "It's been a real cause célèbre of the tea party."

Fears of political gridlock and government shutdowns could send stocks tumbling. Those fears combined with new stock market highs mean this might not be the time to jump into stocks, he says.

"Take a breather. Given these developments, I wouldn't be aggressive."

Still, political infighting could present a buying opportunity if it sends stocks down, he adds.

"The vast majority of declines since 2009 have been buying opportunities," he says. "When you're dealing with the stocks of high-quality companies that simply aren't very expensive, then any weakness is generally a buying opportunity. But right this minute, I wouldn't be aggressive."

Cramer isn't the only one worried that Cantor's defeat means partisan gridlock between the parties.

"In terms of getting anything done from a fiscal standpoint, it’s going to be difficult," Cathy Roy, chief investment officer for fixed-income at Calvert Investments, tells Bloomberg News. "I don’t think there’s any scenario where things can get better between the two camps."

Republicans with more-partisan reputations will vie for Cantor's leadership post, Bloomberg News reports.

"Cantor was good at finding compromises relative to the rest of the party," Michael Block, chief strategist at Rhino Trading Partners LLC, tells Bloomberg News.

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