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Cramer: Prepare for Sector Rotation?

Wednesday, 13 May 2009 | 7:49 PM ET

When stocks talk, Cramer told viewers on Wednesday, you better listen. And the message sent by a 184-point Dow decline was loud and clear: The recession ain’t over yet.

What Went Wrong?
Insight on the day's market declines, with Mad Money host Jim Cramer.

Just look at General Mills , Johnson & Johnson , Abbott Labs , Merck and Procter & Gamble . These classic defensive names today performed much better than companies that require a strong economy to do well. GIS, in particular, withstood a particularly negative Wall Street Journal story – “Regulators Find Hole in Cheerios Claim” – to finish the day down just 19 cents. The other four closed higher.

What’s the market so worried about? Well, retail sales were a problem, companies seem dependent on secondary offerings to raise cash, and Washington’s back to its anti-stock ways. Today alone, there was talk of taxing employee health benefits and government-imposed salary caps for banks (whether they took TARP funds or not). This is what drove investors away from the market’s leaders over the past two months – the oils, techs and banks – as well as the transports, construction companies and anything related to consumer spending, and into food and drug stocks.

Cramer’s message to viewers: The market is just too fragile right now for Washington’s meddling. And Wall Street spoke up to let the White House know how investors felt. Even more importantly, though, is that we should prepare for a sector rotation. The big money will soon shift from economic recovery to economic hardship. Nothing signaled this more than General Mills’ unflinching reaction to the day’s bad news.

Better start looking for the bull market your local cereal aisle, Cramer said.

Cramer's charitable trust owns Abbott Labs and General Mills.

Call Cramer: 1-800-743-CBNC

Questions for Cramer? madmoney@cnbc.com

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