China may have signaled it's going more hard-line on trade, but it could be a good thing, former U.S. negotiator Clete Willems told CNBC.World Economyread more
As China's economic growth declines, some analysts say Beijing may have to spend more on infrastructure, adding to concerns about high debts.China Economyread more
After years of speculation, Neuralink, the brain-machine interface start-up co-founded by Elon Musk, started talking directly to the public on Tuesday.Technologyread more
"The charts, as interpreted by Carley Garner, suggest that the upside in the stock market has gotten more limited," Jim Cramer says.Mad Money with Jim Cramerread more
John Paul Stevens, who served on the Supreme Court for nearly 35 years and became its leading liberal, has died.Politicsread more
Aarti Borkar from IBM Security says artificial intelligence bias can exist at three levels: the program, the data and the people who design those AI systems.Cybersecurityread more
A key read on the industry, the Architecture Billings Index, fell into negative territory in June, according to the American Institute for Architects. Inquiries for new...Real Estateread more
The largest U.S. banks are scrutinizing members of the Federal Reserve for any insight into how the central bank will tinker interest rates.Banksread more
Mikaila Ulmer may be just 14 years old, but the Me & the Bees Lemonade founder knows a thing or two about business.Young Successread more
U.S. President Donald Trump said Tuesday that Washington and Beijing have a long way to go on trade, adding that America could place tariffs on an additional $325 billion...Asia Marketsread more
The U.S. and China restarted their trade talks, but signs are showing a comprehensive deal could be a long way off, if it happens at all.Marketsread more
Jim Cramer has been saying for days that he thinks the market is overbought. He saw evidence of this on Thursday when investors scavenged for whatever growth stocks they could find, which was why there was aggressive buying of biotechs and fast-rising technology stocks.
On day two of the slowdown, investors bought staples. Those are the companies that wouldn't miss numbers even if the economy slows down. They have lower risk, even though they may have less reward. Cramer likes to call them the "chicken growth stocks."
This group includes companies like PepsiCo, Kimberly Clark, Kraft and Eli Lilly. Cramer thinks investors have now accepted that they will need to sacrifice the potential upside for steady profits and a good night's sleep.
"I like to teach this kind of stuff because I want you to understand why stocks act like they do," the "Mad Money" host said.
Often Cramer sees random or stupid moves and he thinks the market is irrational. But the kind of stock rotation Cramer has seen these past few days is something completely different. This is more of a seasoned playbook rotation that works the same way every time like clockwork because of the mindset of big money managers.
For instance, hedge fund managers are more concerned with fast money and take action quickly. They reach for the growth stocks with the most risk, such as Celgene, Regeneron and Amazon. They can handle a possible downside and will jump ship the minute the economy starts to accelerate again. That is why there is always a rally in high-growth stocks the day after investors think there is a slowdown.
Then there is mutual fund money, which is a very different animal. They make strategic decisions. Portfolio managers meet, discuss, kick around ideas and mull over it. Then they meet again, and collectively decide what companies could have good growth in a slowing environment.
Mutual funds will start to buy food and drug companies and consumer packaged goods plays; again, PepsiCo and Kraft are winners, along with Eli Lilly.
Read more from Mad Money with Jim Cramer
"In a slowdown, we'll get a decline in interest rates. Unlike those high-risk, high-reward growth stocks the nimble traders loaded up on yesterday, these consumer staple companies have sky-high dividends that give you a much better yield than the bond-market competition," Cramer explained.
And that is exactly how a rally occurs, like it did on Friday.
Cramer thinks it really is that simple, which is why investors should now be able to play the slowdown to their advantage.
"These are trade secrets — no hedge fund or mutual fund wants the public to know their strategies because it would cut into their profits," Cramer said. (Tweet this)