CNBC's Jim Cramer on Monday recommended investors adopt a "barbell" investment strategy as Wall Street looks forward to a reopened U.S. economy.
A barbell strategy is one where investors opt to buy securities that fit into two likely scenarios and avoid the ones in between. In Cramer's case, his investment thesis on one end is to find stocks that can work in the pandemic and on the other end those that will work post-pandemic.
"You need a barbell with the Covid-19 winners on one end, the stay-at-home stocks," and the "economic recovery winners on the other end," the "Mad Money" host said. "The barbell portfolio was the best strategy for today," given the latest developments from Moderna.
Wall Street players were motivated to buy stocks after Moderna released positive data from its Covid-19 vaccine trials, sending the major indexes up. Investors were also prompted by some states' push to reopen their economies and comments from Federal Reserve Chairman Jerome Powell that his agency is "not out of ammunition" to shore up the economy "by a long shot."
"No, there's really no limit to what we can do with these lending programs that we have," he told CBS' Scott Pelley in a "60 Minutes" interview on Sunday.
The Dow Jones surged 3.85%, or nearly 912 points, to 24,597.37 for its biggest percentage gain since early April. The S&P 500 rallied 3.15% to 2,953.91, and the Nasdaq Composite rose 2.44% to close at 9,234.8.
Cramer warned, however, that investors approached the market with a "better-to-be-sorry-than-safe" attitude. He thinks a multitude of stocks went up that are vulnerable should Moderna's efforts prove to be fruitless.
Moderna, among the first biotechnology companies to begin human trials for a vaccine candidate, reported that doses of its potential vaccine yielded Covid-19 antibodies in dozens of participants. The drugmaker's shares soared 20% to $80, a record close, on the news. Cramer welcomed the development but took on a cautious outlook.
"This data doesn't prove anything, it just suggests that Moderna might be on the right track," he said.
If we can get it sooner than expected, "this could be one of the shortest recessions in history, even as it will also be maybe the sharpest," he added.
Cramer noted that stocks in the hardest-hit industries, including travel, oil, automotive, housing and bank industries, all rallied in the session. The rally was buoyed by the updates from Powell and Moderna, he said.
"I know we got good news from Moderna, but let's hope this safety-last attitude goes away, because if there's another big outbreak and we have to go back into lockdown, many of today's winners will come right back down," the host said.