CNBC’s Jim Cramer said Monday he doesn’t think the U.S. is doomed for a recession, but the market is feeling the weight of those fears in the short-term.
The 10-year Treasury bond yield is causing worries after it fell to 1.64%, its lowest level in about three years, but Cramer says he only expects “incremental deterioration.”
“While I think the recession stocks work here, I do not believe that we are headed into a recession, people,” the “Mad Money” host said. “There’s too much going right: lower mortgage rates, lower car [loan rates], robust consumer spending, very strong job creation. Yes, there are weak spots, but that’s hardly the stuff of a recession.”
Earlier in the day, Bank of America said that there was a higher chance than previously thought that the economy would see a deep decline in general activity in the next year, linked to the impact of the U.S.-China trade war and global economic slowdown.
The Dow Jones Industrial Average plummeted nearly 390 points during the session while the S&P 500 and Nasdaq Composite both retreated about 1.20%.
The economy is “all about confidence” and when that sentiment is lost, it can cause a lot of pain on the market, Cramer said. Goldman Sachs on Monday moved to reduce its fourth-quarter growth outlook to 1.8%, blaming the change on trade tensions between the world’s largest economies.
“I’m also a student of the market and the bottom line is that as a student of the market, I know you can’t fight this bearishness short-term,” the host said. “Over a longer time-frame, I think I’ll be proven right about the economy, but for now the day-to-day action is going to favor the slowdown stocks and wreak havoc for the industrials, the technology stocks, and worst of all the financials”
Cramer went on to lay out four areas that investors could place their money in the uncertain market, including gold, safe dividend stocks, staples and retailers that have large scale.
In the gold sector, the host said the asset works in a low interest rate environment as “insurance against economic chaos.” He pointed out gold miners, such as Barrick Gold and Agnico Eagle, and exchange traded funds (ETFs) like SPDR Gold Shares.
Utilities are another safe bet, he said, including American Electric Power, Dominion Energy and Consolidated Edison. Cramer also recommended real estate investments trusts, the likes of Ventas and Verizon.
Cramer said “classic slowdown stocks” like Campbell Soup, Kellogg and Coca-Cola can continue to perform, along with drug names like Merck and Bristol-Myers.
The stocks that make up his WATCH group — Walmart, Amazon, Target, Costco and Home Depot — are actually more safe than most think from the trade war because of their scale, Cramer added.
“The WATCH names are winners in this environment, consistent winners, because they can strongarm their suppliers into eating the costs of the tariffs, and they have such a hold on the American consumer.”
Disclosure: Cramer’s charitable trust owns shares of Amazon and Home Depot.
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