Savvy market watchers use volatility to fatten their portfolios with bargain stocks. But CNBC's Jim Cramer warns that this might not be the best move.
"If we get more strength tomorrow, I think you should use it to take some profits and re-position rather than getting all excited and going all in," the "Mad Money" host said on Wednesday.
"I don't want you to give up and go home, let alone sell everything," Cramer said. "But there are very good reasons to be concerned here."
Tariffs, geopolitical issues and pricey tech stocks are just a few of the red flags investors need not ignore. Here's why.
Tariffs
Uncertainty over whether tariffs will happen, as well as when and to what extent they will be implemented, should be on investors minds, Cramer said.
He pointed out that President Donald Trump "dropped this particular bomb [of an additional $100 billion in tariffs] out of nowhere."
Buying stock of a company that might be dependent on parts or goods coming from China is not the best idea, Cramer said.
In addition, China could — and likely will — retaliate at any time.
"Once the president decides what to target, you think the Chinese are going to say, 'No problem,'" he said. "No. They'll retaliate. Maybe they'll hit us with tariffs of their own. Maybe they'll organize boycotts of American products. Nothing's really off limits."
And it's not just Chinese companies that investors need to watch. The Europeans are also likely to retaliate in the event of increased automobile tariffs, Cramer said.
Geopolitical issues
The market didn't react well when the president launched missiles to strike chemical weapon plants in Syria, nor did it react well when the president announced he wanted the Iranian deal scrapped.
"The stock market tends to respond poorly to geo-political turmoil," Cramer said, but pointed out that the president doesn't share the same goals.
Tech sector arms race
In an attempt to stay ahead of the competition, technology companies are investing heavily in the future. But Cramer remains skeptical of any potential gains.
A few examples: Alphabet, determined to take share from Amazon Web Services, is spending money "like mad," Cramer said. Amazon, in an attempt to be free of the U.S. Post Office, is considering building its own system — an expensive endeavor. Netflix spends money to stay ahead of Amazon Prime. Facebook wants to remain the dominant player in social media, so it continues to build and spend money on server space.
The bottom line: these companies are spending money, but not showing a big enough return for the investment.
WATCH: Cramer lists lingering risks to the stock market
Disclosure: Cramer's charitable trust own shares of Alphabet, Amazon and Facebook.
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