Investors should opt for stocks that do well during recessions as economic issues converge to put serious pressure on U.S. markets, CNBC's Jim Cramer said Thursday as the major indexes tanked.
The Dow Jones Industrial Average closed 660 points lower as shares of Apple, which cut its revenue forecast Wednesday night, dragged on the broader market. The and Nasdaq Composite indexes fell 2.47 and 3 percent, respectively.
But Apple wasn't the root cause of Thursday's pain, he argued. Instead, he said the iPhone maker's shortfall was a "byproduct" of the Federal Reserve's interest rate agenda for 2019, which the central bank said last month would include two rate hikes.
"As a stock-picker, I have to say that [Fed Chair Jerome] Powell's made it a little more difficult to make money," said the "Mad Money" host, adding that the Fed's resilience in the face of an economic slowdown could seriously damage stocks.
Because of the Fed's actions, certain investments that should be good bets here simply aren't, he warned. For one, lower oil prices tend to benefit the airlines because they beget lower fuel costs, but the slowing economic cycle is already weighing on the airline stocks, with American and Delta near their 52-week lows.
Same goes for the travel and leisure plays, the "Mad Money" host said, pointing to the "annihilated" stocks of global hotel operators Marriott and Hilton.
"So, what do you do? Well, you buy the stocks of companies that do well in a recession — even though I don't think we're going into one — that are also bolstered by lower raw costs," Cramer said, specifically highlighting Clorox, PepsiCo and Coca-Cola. "They're the safety stocks. That's what's worth owning."
"If you can drink it or wash with it, Jay Powell just gave you a winner," he quipped.
Unfortunately, Cramer didn't see very many ways out of this Fed-led weakness. One could be if the Fed reconsiders its rate hike plans for the year ahead, an unlikely scenario. Another could be if the United States and China agree on a trade deal, which may still be months away, he said.
"What matters after today are the earnings and how bad they're going to be," Cramer said. "From the looks of Apple? Pretty bad. And that's worth considering as we go into the season that's not too jolly anymore."
WATCH: Cramer talks Apple, Fed impacts on stocks
Disclosure: Cramer's charitable trust owns shares of Apple.
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