Stocks rallied after U.S. regulators authorized Moderna to take its coronavirus candidate to the next stage, but investors should remain cautious about the "dry run" rally, CNBC's Jim Cramer said Thursday.
The U.S. Food and Drug Administration approved the drugmaker to begin a phase two trial of the vaccine. The company's up almost 9% on the day, and the major averages swung up.
"I get this rally. It's based on hope, and while hope should not be part of the equation, the truth is there are some real potential positives now occurring," the "Mad Money" host said.
The tech-heavy Nasdaq is now up slightly on the year for the first time since markets dropped into bear territory due to the pandemic. The Dow remains down more than 16% from the beginning of the year, while the S&P 500 is within 11% of its 2020 start.
Moderna plans to study the potential Covid-19 vaccine on 600 participants and is eyeing to start a phase three trial by summer. Moderna and China's CanSino Biological are the only two companies in the phase two stage for a vaccine candidate. Inovio Pharmaceuticals is the only other U.S. drugmaker to have begun human trials on a vaccine. A reported 70 coronavirus vaccines are currently in development.
Despite the positive developments on the vaccine front, investors should be reminded of negative economic activity, Cramer said.
"This Panglossian worldview says you have to ignore tomorrow's hideous non-farm payroll number, because it's all rearview mirror," he said. "If there's a vaccine around the corner, then you have to believe the economy's bottomed and the future's bright."
In the past week 3 million Americans filed unemployment claims, which brings the number of layoffs during the coronavirus pandemic to at least 33 million in the past seven weeks. On Friday the Labor Department will release its April jobs report, which Cramer said on Wednesday will help give more insight into whether the country is in a recession or, worse, a depression.
While states such as Texas, Georgia and Tennessee slowly reopen their economies, Michigan Gov. Gretchen Whitmer extended her state's stay-at-home order until May 28. She did, however, authorize manufacturing plants to begin opening Monday.
Cramer said there is a possibility that April could represent the "bottom" for some industries as states experience a partial return to normalcy. The comments echo that of Raytheon Technologies CEO Gregory Hayes, who told CNBC earlier Thursday that it can't get much worse for the travel industry as "people can only binge on Netflix for so long."
If civilians feel safe, the economy "will come roaring back," Cramer said. If not, they will continue to quarantine at home and the economic downturn will drag on, he added.
Other questions remain and it's wise to "keep some cash around" for the "inevitable disappointment," he said. He continues to urge investors to own stocks that can thrive in both a recession and post-pandemic society.
"We need to acknowledge that good things can still happen without going into denial about all the bad things that are currently happening," he said. "That's a tough tightrope to walk, but I'll get you where you need to go."