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Cramer: If you're worried about the economy, just look at the retail stocks

Key Points
  • Investors can "hide" in top retail stocks like Walmart amid trade-war-driven weakness, CNBC's Jim Cramer says.
  • The economy is strengthening, consumers are spending, so retail is red-hot, the "Mad Money" host says.
Just look at retail stocks to know about economy

With Wall Street awaiting the results of Federal Reserve's two-day policymaking meeting, CNBC's wanted investors to keep a key trend in mind.

"We keep forgetting that the economy is really strong," the "Mad Money " host said on Tuesday as stocks lifted. "Let's remember that employment is on fire and we just had 4 percent GDP growth last quarter. Hardly anyone saw that number coming. "

U.S. gross domestic product — the sum of all goods and services produced and provided in the United States — rose 4.1 percent in the second quarter, its best reading since 2014. Economists said it reflected higher consumer spending and business investments.

"You overlook the strong economy at your own peril," Cramer warned, explaining that as wages rise and consumers find more money in their pockets, stimulus from consumer spending is not far behind.

To prove why these trends are so important — and potentially profitable for investors — he turned to the retail sector.

"I think there's a strong case for circling back to the retailers. Have you noticed the resurgence in the stock of Walmart? " the "Mad Money" host asked.

Shares of Walmart have rallied roughly 6 percent since the start of June, closing up 0.39 percent on Tuesday, or $89.23 a share.

Cramer also flagged the stock of Target, noting that the 3.2-percent-yielder has also rallied but is still trading at a "depressed valuation" of 15 times next year's earnings estimates. Target's stock dipped slightly into Tuesday's close, settling down 0.7 percent at $80.68 a share.

"I would still consider Costco, even after its run, because of that fabulous membership revenue stream. The numbers there are stellar, " Cramer said. "Please don't overlook the stalled Home Depot because, with a shortage of housing, remodeling's getting very popular. "

With more money to spend, consumers want to remodel their homes, buy in bulk and do other things to boost the value of their personal holdings, Cramer said.

That — paired with the strong performance of toolmaker Stanley Black & Decker and maintenance and repair players like HD Supply — makes stocks like Home Depot a buy, he added.

The major averages all ended Tuesday's trading session higher after a report surfaced that the U.S. and China were looking into easing their trade tensions.

"Today was a gloom-busting day," the "Mad Money" host concluded. "Remember that these domestically oriented stocks react positively on any bad news from China, meaning on anything that suggests the trade war is escalating. So if you're still worried about Chinese tensions, these names are a great place to hide."

WATCH: Cramer makes the case for retail stocks — and Apple
Cramer: If you're worried about the economy, just look at the retail stocks

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