The "multiplier effect" of the ongoing government shutdown is not to be discounted, CNBC's Jim Cramer argued Thursday as stocks rose on reports that U.S.-China trade tensions could ease amid negotiations.
With 800,000 federal workers missing their paychecks, "you've got an uninsured hurricane going on and we don't know when it will end or how much damage it will do," Cramer said. "The insanity of the shutdown just cannot be grasped."
The implications of hundreds of thousands of people falling off the spending grid could soon extend to travel, leisure and retail, as well as the utility space as bills go unpaid, the longtime market-watcher said on "Mad Money."
And even though company executives are increasingly saying that they have seen "no significant slowdown" in their businesses as a result of the shutdown or the late-2018 market weakness, there's more to those words than meets the eye, he said.
"Get used to those words, because I think they're the new normal this earnings season," Cramer said. "'No significant slowdown' pretty much implies that business did peak, that orders have fallen off, but it's not because business organically got worse."
Instead, it's because of the fear that rippled through the market after the Federal Reserve signaled in October that it would put through multiple interest rate hikes in 2019, he said. But now that Fed Chair Jerome Powell has pledged to be patient, the shutdown has taken center stage — and soon, the resulting slowdown could indeed become "significant."
"How can you protect yourself from these cautionary words? [...] I think you have to trim your positions in stocks that are related to the consumer and move that money into stocks that are levered to secular growth trends — trends that won't let up even if there's a significant slowdown in the economy caused by the government shutdown," Cramer advised.
The "Mad Money" host also warned that any forecast cuts or inherent weakness during earnings season could seriously damage the stock market's "midsection," especially after its lift off the December lows.
"You can't game the irrational here, and Washington has thrown us two irrational curveballs in a row: an insanely overzealous Fed chief who was willing to strangle the life out of the economy in order to stop even the barest hint of inflation, and elected officials who are willing to sacrifice the whole economy over a few billion dollars for a mostly symbolic wall," he said.
"At this point, I think the president should just call for donations from rich people who want the wall and let the government reopen already," Cramer concluded. "Whether you love the idea or you hate it, we'll all be better off when this shutdown ends."