Enjoy the stock market's strength while you can, Jim Cramer warned his Mad Money viewers Thursday. There's not enough of the market that can go higher, he cautioned, and that means selling into rallies and raising cash where you can.
Cramer explained that the markets are being ruled by the "twos and tens," more specifically the yields on the 2-year compared to the 10-year Treasuries. Why is this important? Cramer said it's because a tight-spread, like we're seeing now, is unusual and typically a harbinger of an upcoming recession. This is a strong signal that bond traders and money managers aren't likely to ignore, which is why we're seeing weakness in the financials and the homebuilders, which are the most interest-rate sensitive.
The markets are also paying close attention to another "T", and that's tariffs. Retaliation from China is likely as the next round of President Trump's tariffs take effect. As a result, means money managers will be selling the industrials, especially the auto makers. They're also weary of tech stocks and companies like Starbucks (SBUX) - Get Report , where China could choose to interfere or boycott.
That doesn't leave many safe places to invest, Cramer admitted, which is why he's tempering his bullishness and sticking with small-cap stocks and domestic names that aren't affected by trade or interest rates.
Cramer and the AAP team are booking some profits on Nordstrom (JWN) - Get Report , after a research note that put the stock in an optimistic light. 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.
FANG Stocks Still a Winning Hand
Sometimes, it's better to be lucky than good, Cramer reminded viewers, which is why the FANG stocks (his acronym for Facebook (FB) - Get Report , Amazon (AMZN) - Get Report , Netflix (NFLX) - Get Report and Alphabet (GOOGL) - Get Report ) continue to shine.
In a market that's worried about tariffs, and China in particular, Cramer said, it's a happy coincidence that FANG has nothing to do with China. FANG also has secular growth that trumps the possible economic slowdown caused by tariffs or trade.
What else does FANG have going for it? These stocks are also immune to inflation, whether it be from commodities, freight, or oil.
None of the FANG stocks are sitting still, either. Cramer said Facebook's business is accelerating, especially at Instagram, while Amazon's acquisition of Pillpack was a brilliant move into the pharmacy space.
Netflix, meanwhile, continues to innovate -- leaving Alphabet as the laggard, up only 8% for the year. But Cramer noted that Alphabet has a ton of cash and a lot of opportunities in front of it, making it a worthy member of FANG.
So while nothing lasts forever, Cramer conceded, FANG has sustained the stock market since he first coined the term five years ago.
Over on Real Money, Cramer says business and the economy are strong, despite the mixed messages from the market. Get more of his insights with a free trial subscription to Real Money.
IPOs: Supply and Demand
The market for IPOs remains hot, Cramer told viewers, but that doesn't mean investors should jump on every deal that comes along. As he warned three weeks ago, the enterprise software market had overheated, and since then stocks like Carbon Black (CBLK) - Get Report have fallen 28%.
In the end, the IPO market is always about supply and demand, and with the highest supply since 2012, investors need to be vigilant, especially with private equity-backed and Chinese-based deals.
Cramer said he's still a fan of Dropbox (DBX) - Get Report and Spotify (SPOT) - Get Report , but questioned whether the Chinese IQIYI (IQ) - Get Report or Bilibili (BILI) - Get Report are worthy of a spot in your portfolio. Now that shares of Zuora (ZUO) - Get Report have cooled, he suggested taking another look at this company as well.
Executive Decision: Paychex
Mucci said that despite in-line earnings this quarter, Paychex had a solid year and a strong quarter with 7% revenue growth and a 12% increase in its dividend. He said the extra profits from tax reforms earlier this year were spent on returning capital to shareholders and on creating new and better products for customers.
One of the bright spots for Paychex has been human resource outsourcing. Mucci explained that harassment has been top of mind for many small businesses and without a full human resource department, these customers are turning more and more to Paychex for help.
When asked about our economy, Mucci said the South continues to see the best growth, while the West has the highest wage growth at the moment. The top sector continues to be manufacturing, although growth has slowed slightly from previous levels.
In the Lightning Round, Cramer was bullish on Shake Shack (SHAK) - Get Report , Jack Henry & Associates (JKHY) - Get Report , Kraft Heinz (KHC) - Get Report , Magellan Midstream Partners (MMP) - Get Report , Enbridge (ENB) - Get Report , FedEx (FDX) - Get Report , Adobe Systems (ADBE) - Get Report , Blackberry (BB) - Get Report and Marathon Petroleum (MPC) - Get Report .
In his "No-Huddle Offense" segment, Cramer said that while negativity is defining the moment, it's simply not right.
Cramer said he heard it on conference call after conference call -- breathtaking pessimism from analyst after analyst. It didn't matter if it was spicemaker McCormick (MKC) - Get Report , furniture maker Herman Miller (MLHR) - Get Report or home-builder KB Home (KBH) - Get Report , the negativity was everywhere.
But in the end, Cramer said, Herman Miller's CEO said it best, when he pointed out that while politics and the global environment makes him nervous, there are no signs that any of it is affecting their business.
Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.
To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.
To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here.
At the time of publication, Cramer's Action Alerts PLUS had a position in JWN, FB, AMZN, GOOGL.