CNBC's Jim Cramer said Wednesday that the economy is in good shape, but Wall Street could talk itself into a recession.
The stock market, climbing less than 1% during the trading day, continued to stage its recovery from last week's massive sell-off that was triggered in large part because of worries about a recession signal, on top of the prolonged U.S.-China trade war.
"If the president were to simply calm down the rhetoric on China, rather than taking them on like some kind of trash-talking wide receiver, the bears would lose their biggest crutch," said the "Mad Money" host, who blamed fears about the bond market on "angry rhetoric and frightening jeremiads from supposed experts" who should listen to conference calls.
Quarterly reports from Lowe's and Target gave more proof that the American consumer is strong, but consumer spending could slip if concerns about yield curve inversion continue to dominate the conversation, Cramer argued.
The comments came after shares of the two retailers sprang double digits on top-and-bottom line beats and guidance raises. Their same-store sales data, the host said, corroborated what the market has learned about the consumer from other retailers such as Walmart and Home Depot.
The yield curve on Wednesday, however, briefly inverted again. That happens when the 2-year Treasury yield climbs higher than the 10-year Treasury yield, which means investors can make more money on the shorter-term bond than the longer-term one. Economists use the inversion as a trusted measure to project recessions.
"When the yield curve inverted before the Great Recession, it was at the end of 2005. The stock market didn't peak until the summer of 2007," Cramer said. "That's not helpful."
On the other hand, the host said that long-term U.S. bonds are falling because foreign investors are buying them up to get better returns than the lower interest rates on European bonds.
Bank of America CEO Brian Moynihan told CNBC Wednesday morning that despite recession fears from tariffs and a slowing European economy, "the U.S. consumer continues to spend and that will keep the U.S. economy in good shape."
"I'd love to say that the optimistic universe is most likely to prevail, but the talking heads talk endlessly about how a recession is inevitable," he said. "This kind of talk sows fear, which erodes confidence, and without confidence business pauses its new hires and its investments, which then leads to a downturn in consumer spending, which then leads to a recession."
Disclosure: Cramer's charitable trust owns shares of Home Depot.