The stock market is now in the hands of the bond market, Jim Cramer admitted to his Mad Money viewers Wednesday. Even with unemployment at record lows, investors are still taking their cues from bonds, where an inverted yield curve always signals a recession.
Cramer said he heard plenty of reasons why investors were selling Wednesday. Some feared that our continuing trade war with China has finally impacted the global economy, while others fretted that interest rates here at home were still too high. Some worried about negative interest rates on bonds elsewhere in the world, others cited Brexit, still others political uncertainty with next year's elections here in the U.S.
But Cramer said what concerned him most today was a weak outlook from Boeing (BA) - Get Report , Cisco Systems (CSCO) - Get Report and Macy's (M) - Get Report , all of which may signal that things are indeed beginning to take a turn for the worse.
Cramer is not expecting things to turn quickly, however. He said investors can certainly raise some cash if they have profits, but he would not sell everything until we get more clarity and perhaps a response from the Federal Reserve confirming that more interest rate cuts might be needed to offset additional tariffs.
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Cramer and the AAP team say Alphabet (GOOGL) - Get Report is their preferred FANG stock to buy on the decline because it's the cheapest in the group and search just reported strong, accelerating sales growth. Find out what they're telling their investment club members and get in on the conversation with a free trial subscription to Action Alerts Plus.
Shopping in the Retail Sector
Shares of Macy's plunged 13.2% Wednesday after the retailer posted an abysmal quarter that included earnings of just 28 cents a share. Analysts had been expecting earnings of 45 cents a share. Should investors be worried that all of retail is in trouble?
Cramer said Macy's was hit by a double whammy of a strong dollar which crimped sales at its flagship New York store and rising tariffs, which will certainly take a bite from the company's margins. With shares sporting a 9% yield, Cramer said investors clearly aren't expecting Macy's to hit its targets for the rest of the year.
But Macy's does not represent all of retail, Cramer noted. Many off-price retailers like TJX Companies (TJX) - Get Report and Burlington Stores (BURL) - Get Report don't have flagship tourist destinations like Macy's does, and they buy their merchandise from other retailers, like Macy's, so they're not influenced by tariffs.
Cramer said he's still a fan of WATCH, his acronym for Walmart (WMT) - Get Report , Amazon (AMZN) - Get Report , Target (TGT) - Get Report , Costco (COST) - Get Report and Home Depot (HD) - Get Report , but said other retailers may not have the size and scale needed to offset tariffs.
On Real Money, Cramer says the algorithms cannot be overridden. They are too powerful. Get more of his insights with a free trial subscription to Real Money.
The Silver Lining
There's no denying that Wednesday was a horrible day, Cramer told viewers, but that doesn't mean there isn't a silver lining. Stocks do get cheaper as they go lower, he reminded them, and that's certainly been the case with two recent IPOs, Revolve (RVLV) - Get Report and The RealReal (REAL) - Get Report .
Revolve is an online retailer aiming to turn fashion into science. The company operates three online stores and introduces thousands of new styles, doubling down only on the ones that are working. Shares debuted at $18 and immediately shot up to $34 on their first day of trading, but last week, they plunged 22% along the markets and another 14% today. At $22 a share, their lowest level since the IPO, Cramer said he's a buyer.
The same with The RealReal, an online consignment shop that saw its shares fall 23% on Friday. Investors looking for a good entry point into this stock just got one.
In his "Selloff Strategies" segment, Cramer took calls from Cramerica to help them look at today's decline logically and not from a place of fear and panic. Panic is never a strategy, he reminded viewers, even on a day like Wednesday.
Executive Decision: Village Farms International
For his "Executive Decision" segment, Cramer spoke with Michael Degiglio, CEO of Village Farms Int'l (VFF) - Get Report , the Canadian cannabis grower that just posted earnings that included 27% sales growth.
Degiglio said that Village Farms has 30 years of experience with precision agriculture, which made the transition to cannabis an easy one. The company is already among the lowest cost producers.
Degiglio said their plans are to sell their cannabis to companies interested in making CBD-based products, which is among the fastest growing segments in the cannabis space.
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At the time of publication, Cramer's Action Alerts PLUS had a position in GOOGL, CSCO, BURL, AMZN, HD, CVS.