CNBC's Jim Cramer said Thursday that investors should view future sharp pullbacks on coronavirus fears as buying opportunities. The "Mad Money" host said that's especially true when investors become concerned about the Covid-19 situation in Europe.
"On a day like today where the morning traders foolishly dump everything, you've got to pounce and do some buying," Cramer said. "I don't know when the next buyable dip will come along, but when it happens and it's one of these ones where the [overnight] traders cause it, I want you to be ready."
All three major U.S. averages closed lower Thursday, with the Nasdaq falling 0.5% while the benchmark S&P 500 gave up 0.2%. The Dow Jones Industrial Average lost 19.8 points, or 0.07%, but it had been down over 300 points early in the trading session.
Wall Street is monitoring the ongoing stimulus negotiations in Washington, as well as the rising infection rates across Europe that have led countries to reimpose public-health restrictions. However, Cramer emphasized that investors should not use the developments in Europe for decisions on U.S. equities.
On Thursday, with the pan-European Stoxx 600 down over 2%, Cramer said people assumed the selling would spill over into U.S. markets and that's what drove stock futures sharply lower. But ultimately, the major U.S. averages, while still closing Thursday in the red, later rallied off their morning lows.
"This morning's Europe inspired sell-off turned out to be the perfect buying opportunity," Cramer said. "But it's not just that these weak hands got too scared this morning. The fact is we were able to bounce because ... the United States is not Europe, and that's something the pajama traders still haven't figured out."
Although there is an interconnectedness between the U.S. and European economies, Cramer contended it is wrong to extrapolate too much from what is happening across the Atlantic. To be sure, America is also experiencing its own rise in Covid-19 cases, Cramer said, but fears of another round of lockdowns in European nations don't mean the U.S. is headed down a similar path.
"It's just not politically viable in this country. When Europe shut down, their governments made sure everyone kept getting paid," Cramer said. We can't reliably do that here ... which means another shutdown would absolutely devastate the economy. Plus, there's way too much political opposition to shutting down— the governors and mayors, they're not going to let it happen. They might close the bars and restaurants, but they won't shut down everything."
Another difference between the U.S. and Europe that investors must remember is the state of banks, Cramer said. European financial institutions are not nearly as well-capitalized as American counterparts, he said, which means "when these European economies get shut down, they take their banks with them."
Additionally, he said, many of the top American companies have diversified their revenue streams to be less reliant on Europe, making them less sensitive to economic downturns there. Some of the companies that do generate significant revenues in the region, such as consumer packaged goods firms and Nike, won't be hurt by a recession, Cramer contended.
Moreover, America's tech titans, which make up a considerable share of the S&P 500, do have exposure to Europe, but Cramer said they're the kind of stocks that benefit from a stay-at-home economy.
Put it all together, he said, and it means investors in U.S. equities should not be making buy or sell decisions based on coronavirus conditions in Europe.
"Covid is making a third run at us here. We're still jokers when it comes to testing and contact tracing. ... We don't have a national strategy," Cramer said. "But, unlike Europe, we've gotten used to the pandemic because it never really went away. We've spent months coming up with coping strategies to protect our most vulnerable."
Editor's note: This story was updated to reflect that fears of another round of lockdowns in European nations don't mean the U.S. is headed down a similar path.