As stocks on Wall Street chug higher and the economy slowly emerges from state-sanctioned lockdown, CNBC's Jim Cramer is tapping the break on the newfound bullishness.
The "Mad Money" host said Tuesday that investors are dumping the stay-at-home stocks that have performed well through the worst of the pandemic and placing their bets on stocks of businesses that can bounce back from an economic recovery.
"If we don't have a giant outbreak in the states that are aggressively reopening — a big if — then a V-shaped recovery is actually on the table," he said. "And if a V is on the table, then you need to own some banks and some cyclicals."
The comments come after the major averages continued to claw further away from bear market territory. The Dow Jones — now within 3,600 points from the start of the year — ended the session up almost 530 points, or 2.17%, at 24,995.11. The S&P 500 gained 1.23% to finish at 2,991.77. The broad index is within 240 points of its levels at the beginning of the year.
The Nasdaq Composite, which is now enjoying a 4.36% gain on the year, rose 0.17% to 9,340.22 during the session.
Investors are betting on both hopes for a Covid-19 vaccine and a speedy recovery in the U.S. economy as states continue to open up for business activity, if limited, across the country.
"I may not be totally sold on this V — you can't switch directions that fast, [it] could be more of a U with this much unemployment," Cramer said, "but you've got to marvel … at the strength we're seeing, especially in housing and airlines, two industries that appeared to be on death's door not too long ago."
Cramer noted that hard-hit tourist stocks, like Southwest Airlines, Disney and the cruise lines, are finding buyers on the market. Investors are shifting their portfolio from lockdown and slowdown-orientated holdings to "rack up huge gains" in case the economy is on the path to a rapid rebound, he said.
The host continued recommending that investors take on a barbell portfolio strategy, one where investors pick up stocks that have exposure to either a recessionary environment, like drug and food stocks, and an economic recovery, including bank and cyclical holdings.
The main headwind the market will continue to be challenged by is the lack of a Covid-19 vaccine that will give consumers more confidence to return to their normal lives. Additionally, tens of millions of Americans remain out of work as 38 million people have applied for jobless claims in the past nine weeks, Cramer cautioned, adding that the economy won't return to normal until they are rehired.
"When you have a conservative outfit like [Johnson & Johnson] talking about the first quarter of 2021, and they also have the ability to be able to produce billions of the vaccine, I have to believe that things are rolling along nicely," he said. "If we can beat this thing early next year, that's huge, but still we've got to get through the next six months without it and I don't know about that."
Disclosure: Cramer's charitable trust owns shares of Disney and Johnson & Johnson.