NEW YORK (TheStreet) -- "The U.S. stock market is different from the U.S. economy," Jim Cramer told his his "Mad Money" TV show viewers on Thursday, going on to explain that it's this disconnect that explains why equities can continue to rally even if the recovery stateside continues to flounder.
"This lesson is the same as it's been for the last 6,000 points," he said.He argued that since the majority of large-cap U.S. companies on average only book 30% to 40% of their sales from the U.S., it's a mistake to expect their performance to move in lockstep with domestic economic data. He said selling companies like United Technologies (UTX) or Norfolk Southern (NSC) because initial jobless claims were poor is the wrong move. The economic picture abroad is improving, according to Cramer, who noted that central bankers in other countries have been talking about impending victories over inflation. He then laid out the three keys to a continued rally in equities, saying the market needs to see China stop tightening its monetary policy, Japan come back online, and the Greece crisis be resolved. On the homefront, Cramer acknowledged that getting a deal done on the debt ceiling was important, but he also said there's growing evidence that inflation will be held in check, such as the recent decline in oil prices since the surprise strategic reserve release, and declines in grain and cotton prices. He added that exports can't be the whole answer for the market, noting that a bounce in housing was needed as well, but he maintained the importance of understanding the role the global economy plays in how U.S. companies fare, stating that China's central bank is actually more important to the recovery in America than the Federal Reserve. "The essence of this rally is the overseas bounty and the ability of these companies to take advantage of it," he said, referring again to the multi-national, large-cap names. Cramer said he sees big money flowing into the industrials next, He also said investor consternation has been an impediment for some to participating in this rally, so he was happy to see the Fed's $600 billion bond-buying program come to a close on Thursday. Cramer also mentioned Joy Global (JOYG), and PPG Industries (PPG) as two companies that understand America has become a "miserable place to do business" and were acting accordingly. "International exposure is key," was Cramer's mantra as the segment drew to a close.
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