The universe of winning stocks is beginning to feel a little smaller, Jim Cramer cautioned his Mad Money viewers Tuesday. The markets are being led by the wrong stocks, he said, and owning individual stocks is getting a tad more risky.
Cramer said he cannot overstate the importance of Federal Reserve chair Jay Powell's recent comments. There's a big difference between containing inflation and overshooting on interest rates in order to obliterate it.
In the days of Janet Yellen, the Fed was never much of a concern, but in this market, these words matter. Even President Trump isn't a fan of aggressive rate hikes.
But Cramer has never been much of a macroeconomic guy. He instead takes a bottoms-up approach by talking to individual CEOs, and probably talks to more of them than anyone else on TV.
What has he learned? CEOs weren't worried six months ago, but they're starting to worry today. They're concerned about a slowdown in housing and in loan growth. They're worried about fuel prices crimping the airlines. And they're worried how the trade war will affect transportation.
Cramer and the AAP team are initiating a position in Palo Alto Networks (PANW) - Get Report . 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.
Off the Charts: Interest Rates
In the "Off The Charts" segment, Cramer checked in with colleague Bob Moreno to see where the markets might be headed if interest rates keep heading higher.
Moreno first analyzed a chart comparing the yield of the 20-year Treasury to the Consumer Staples ETF (XLP) - Get Report . He noted that since 1999, the two have held an inverse relationship which only intensified in 2010 as rates plunged, making dividend paying consumer stocks the only game in town. If rates fall back below 3%, Moreno felt the consumer stocks could again rally.
Moreno also looked at the daily chart of Phillip Morris (PM) - Get Report , noting the stock's inverse head-and-shoulders pattern, which signaled the stock could fill in the gap created back in April if interest rates retreat. He also noted that Citigroup (C) - Get Report could also rally in this situation.
To see the charts and get more of Cramer and Moreno's analysis, read Interest Rate Plays: Cramer's 'Off the Charts'.
Cramer's Power Rankings
In the second installment of "Cramer's Power Rankings," Cramer tackled the consumer discretionary stocks to see which companies have the brightest future. Looking at their year-to-date performance, Advanced Auto Parts (AAP) - Get Report and Amazon (AMZN) - Get Report top the list, but Cramer's rankings took a different slant.
Cramer gave the No. 1 slot to Amazon, as the company's Prime member service is essential and the company is now the third-largest advertising platform.
The second spot in the rankings went to TJX Companies (TJX) - Get Report , parent to TJ Maxx, Marshall's and HomeGoods. Cramer said this is one company that is virtually immune to Amazon, and their earnings speak for themselves.
He continued his "Power Rankings" with the consumer staple stocks, which include things like food, beverages and your favorite toothpaste. Cramer said if the Fed does tighten the economy right into a slowdown, every portfolio should include at least one of these names.
Coming in at No. 1 was Constellation Brands (STZ) - Get Report , makers of Corona and Modelo, as well as being a big investor in Canada's Canopy Growth Corp (CGC) - Get Report . Cramer said this stock has a lot more room to run.
In his "No-Huddle Offense" segment, Cramer said investors need to pay attention to the horrible pre-announcement from paint and coatings maker PPG. It was only a few months ago the company painted a bullish picture of its business. But now, the company is getting slammed with rising commodity and transportation costs, forcing it to raise prices by 10%.
Cramer said this surprise announcement now casts doubts on a whole swath of the market, including anyone who could be hurt by a strong dollar, and it's an important shift in outlook that investors need to pay attention to.
Over on Real Money, Cramer says the cloud stocks are nowhere finished as a growth cohort. Get more of his insights with a free trial subscription to Real Money.
Make Money on Closed-End Mutual Funds. TheStreet's Robert Powell recently hosted an all-star panel of experts who explained everything you need to know on closed-end mutual funds, an often-overlooked investment class. Click here to register and watch for free.
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 PANW, C, AMZN, KSS, RTN.