CNBC's Jim Cramer said Wednesday the economy is better than the recently embattled stock market reflects.
"I think you're being faked out" by tanking U.S. equities, Cramer said on "Squawk on the Street," pointing to relatively solid corporate earnings and signals in the U.S. economy that growth can withstand drag from the U.S.-China trade war.
The Dow Jones Industrial Average opened more than 300 points lower Wednesday, a day after breaking a five-day losing streak. Stocks quickly accelerated those losses as money poured into the perceived safety of bonds, which on Wednesday pushed the yield on the benchmark 10-year Treasury note, used to set mortgages and auto loans, down to October 2016 lows around 1.6%.
"It's very easy to take our cue from a false cue," Cramer added, warning investors not to move too quickly when markets are in turmoil. "We have to figure it out."
This week's stock sell-off started Monday, sparked by concerns about the impact on global economic growth from the escalating trade dispute between Washington and Beijing.
The "Mad Money" host said Wednesday that everybody needs to "dial back the rhetoric" and to look at the "reality of the companies that are reporting" solid earnings.
Cramer made similar points earlier on "Squawk Box," saying the economy still looks solid based on housing. It's true, he said, that there are "whippy capital flows" but also opportunities to buy stocks without much China exposure.
"We can sit here and create a fire or we can put one out," he added. "I'm going to opt for the latter."