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No single data point rules the market, Cramer told viewers on Monday. There are too many moving parts, all of them important, to disregard the good news just because we got some bad. Case in point: Last week’s unemployment number and the investors who cashed out early today because of it. That was a “big mistake,” the Mad Money host said.
Apparently, Wall Street agreed because the Dow rebounded from its midday losses to close 44 points higher, and stocks jumped 119 points from their morning lows. That would have been a great time to buy, but too many people saw only a worst-case scenario, ignoring all the evidence that points to a worldwide recovery.
Cramer would never shrug off 9.5% unemployment, and he went so far as to call jobs “the biggest piece” of the economic puzzle, but investors also have to take into account the other forces at work here: China’s demand for commodities grows unabated. Apple [AAPL
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] continues to sell warehouses and warehouses of iPhones. Wireless Internet is booming, helping companies like Qualcomm [QCOM
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] and Palm [PALM
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]. General Mills [GIS
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] and Yum! Brands [YUM
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] are doing well. Gasoline prices are headed to $2.30 – weren’t they bound for $3? – and that will put money in consumers’ pockets. As you can see, there’s a long list of positives that needs to be taken into account before you sell off your stock holdings.
Given all of these factors, where does Cramer see us going from here? He predicts a slow recovery. Not one that produces lots of new jobs or spending, but rather decent earnings due to layoffs and cost cutting. And while we won’t see Dow 10,000 in the near future, Dow 6,300 won’t happen either. Instead, we’ll stay range-bound between the high 7,000s and high 8,000s. Federal Reserve Chairman Ben Bernanke has done enough to stave off those early March lows, but we need a second stimulus to boost both the economy and the markets.
So stay diversified. Own stocks that do well on a rebound, as well as those that offer a cushion when the indexes dip. When the market pulls back, Cramer recommending buying defensive names and companies that pay a high dividend yield, such as Coca-Cola [KO
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] and Eli Lilly [LLY
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]. Firms with accidentally high yields work as well: Federal Realty [FRT
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], Nordic American Tanker [NAT
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] and Illinois Tool Works [ITW
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]. These were the stocks to buy when the Dow hit its low this morning. Investors should look for similar sell-offs from US-centric investors going forward.
Cramer’s bottom line? A lone economic indicator, no matter how important, doesn’t outweigh all the other indicators. Keep this in mind the next time investors panic. Don’t make that mistake.
Cramer’s charitable trust owns General Mills, Qualcomm and Yum! Brands.
Call Cramer: 1-800-743-CNBC
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