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Cramer: Markets Say Sell the Cyclicals

Cramer may not think the economy is headed for a double dip, but the markets sure seem to.

During Monday’s Stop Trading!, he said the “endless accumulation of General Mills,” a traditional defensive stock, is just one sign of investors’ lack of confidence in the economy. The same kind of action in similar stocks, like Pepsico and Kellogg , also points to a shift away from the cyclical names that investors want when the economy is strong.

Stocks that often serve as a barometer of economic health are down. He said minerals companies Freeport-McMoRan and Vale are “trading like death,” Cramer said. The strategy for most institutions seems to be to short the euro and FCX while going long General Mills .

“You just want that trade to unwind,” Cramer said, “because that trade has just taken on too much of a life of its own, I think.”

But he said it’s too dangerous to bet against Pepsi, which is now at $63, going to $70, or to assume that Friday’s unemployment-inspired sell-off was wrong. And that's despite what he sees as pockets of strength in the global economy, namely China’s growing middle class.

“Obviously the market is saying,” Cramer said, “‘Sell the cyclicals.’”

Also, the Financial Times has reported that Goldman Sachs is suffering the same PR crisis in China that it has here in the US. Cramer thinks the Chinese Communist Party “could make life miserable for Goldman.” As a guide to just how miserable, he said he’d be watching to see if Goldman gets in on any number of key initial public offerings coming soon from China.

“If they really hate Goldman,” Cramer said, “they’ll cut them out of every single IPO.”

When this story published, Cramer’s charitable trust owned Goldman Sachs.

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