An inverted yield curve is not an automatic signal that a recession is around the corner, and investors should be aware that there are bargains on the market, even if the economy is slowing down, CNBC's Jim Cramer said Friday.
Three-month Treasury yields surpassed 10-year Treasury notes Friday and the major U.S. indexes stumbled as the S&P 500 finished its worst day since January. The Dow Jones Industrial Average, pushed by bank stocks, dropped 459 points and the S&P 500 lost 1.9 percent, and the Nasdaq Composite fell 2.5 percent during the session .
Cramer blamed the selling in large part on computer algorithms because yield curve inversions in the past have preceded recessions, most recently in 2007. But he said the machines have no way of differentiating one stock from another.
"People act like this automatically signals that we're going into a recession, but it might signal nothing more than the fact that the Fed should never have tightened in December," the "Mad Money" host said. "We're headed into another week where I think the inverted yield curve will embolden the bears ... [but] the Fed just took us one rate hike too many and now we're all paying the price."
Cramer suggested that investors "stay the course," and concerned investors should stick with stocks that have the safest dividend yields "and get ready to ride through these troubled waters."
His game plan for next week is below: