The big financial institutions are negative right now and that means any positive light is going to be bent into negative light, Jim Cramer told his Mad Money viewers on Thursday evening.
Right now, all the talk is about "late cycle," as in, we're in the late stage of the economic cycle. These feelings persist even on days where stocks do well and it's a mindset that trumps almost everything else, Cramer said.
The economy can handle the initial rate hikes from the Federal Reserve, because rates were so low to begin with, Cramer reasoned. However, if the Fed continues to hike, it will eventually slow the economy -- which we are seeing signs of now and that's what's got investors so worried.
Should the Fed change its tune and ease up on the hikes or if the White House makes progress on the trade front with China, then perhaps it will change the mood on Wall Street. But for now, the fear is a late-cycle slowdown, he said.
Case in point: Just look at the "excellent" earnings report from Walmart (WMT) or the solid results from Home Depot (HD) . Both initially rallied on the results, but were then sold into because -- as the rationale goes -- they're doing good and they can't get any better than this.
Home builders also saw catastrophic price action, getting slammed in a way that's reminiscent of financial turmoil.
Whether it's true or not isn't the point, Cramer said. It's a feeling on Wall Street that can persist until enough evidence convinces investors otherwise.
Over on Real Money, Cramer says bad news is an excuse to sell at any price. Get more of his insights with a free trial subscription to Real Money.
Wake-Up Call For the Fed?
Circling back on the Federal Reserve, Cramer took a closer look at comments from Chairman Jerome Powell on Wednesday evening. The questions that were asked by Dallas Fed president Robert Kaplan were framed in a way that allowed Powell to show his concern for a potential economic slowdown without having to admit any wrongdoing, according to Cramer.
Put another way, Powell was able to walk back some of previous comments justifying more rate hikes without having to look foolish, Cramer said.
That softening of stance gave bulls hope, which is part of the reason why stocks rallied on Thursday, Cramer said. CEOs are becoming concerned, he added, noting that we're starting to see some economic softening that will worsen if the Fed continues to tighten.
Is it too late to fix it?
That depends on the Fed. If it raises four more times -- once in December and three times in 2019 -- then yes. If it raises rates next month and then takes a pause though, the economy can sustain.
Powell's now aware of what's going on and that will hopefully wake up the Fed, Cramer said.
Cramer and the AAP team are looking at Warren Buffet's increased stake in the financial stocks. 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.
The Dimming of General Electric
General Electric (GE) was once one of the largest companies in the world. Now it sports a market cap of just $71 billion and is down 75% from its highs a little more than two years ago, Jim Cramer said.
But two analysts have been nailing this stock from the beginning. The first was Stephen Tusa out of JPMorgan, who initiated the stock with a sell-equivalent rating back in May 2016 and was warning about earnings and cash flow. John Inch, then with Deutsche Bank but now with Gordon Haskett, was next, and joined in about a year later with his sell rating.
Cramer said that as the situation continued to deteriorate, these guys were constantly a step ahead -- both of the company and Wall Street. As the stock neared or hit their price targets, they would again find new, and correct, reasons to downgrade the stock and slash their targets even more.
This included issues with cash flow, pension obligations, earnings, management and even the dividend cuts, Cramer noted.
Last quarter was a doozy, with GE missing earnings and revenue expectations and slashing the quarterly dividend by more than 90% to just a penny per share. But these two analysts haven't backed off, Cramer said, with Tusa and Inch assigning price targets of $6 and $5, respectively.
The point of all of this? These two have published "brave and rigorous" work that has been correct all along, Cramer said. For that reason, their words carry more weight than management and the stock very well may fail to rally until these analysts turn positive.
Executive Decision: MJardin Group
On the show's "Executive Decision" segment, Cramer spoke with Rishi Gautam, the chairman and CEO of MJardin Group, which began trading Thursday on the Canadian Securities Exchange under the ticker symbol " MJAR".
The company began trading on the CSE after acquiring GrowForce in a reverse merger. Gautam explained that MJardin is now the largest operator in the global cannabis space. The company either manages operations for retailers or runs its own shops, plus grows cannabis is well.
The company currently operates on a 70-30 ratio of managed operations vs. owning their own operations. Over time, Gautam said the company is looking to get that ratio closer to 50-50, and as the industry hits its "second wave," where asset optimization becomes key, that's where MJardin can thrive, he said
The company has a very good feel for the industry, what's needed in each situation and can capitalize on those trends as the cannabis industry grows, he concluded.
Am I Diversified?
On the show's "Am I Diversified" segment, Cramer took a look at a few viewers' portfolios. Here's what he found.
Cramer wanted to swap out Annaly Capital with Merck (MRK) , but otherwise felt the portfolio was diversified enough.
Cramer felt comfortable with Bank of America, Macy's and Nvidia. However, he wanted to swap out Alliance Resource Partners and Two Harbors with Merck and United Technologies (UTX) .
The last caller also got the green light from Cramer, having a portfolio consisting of Honeywell (HON) , Apple (AAPL) , Boeing (BA) , Walmart and Take-Two Interactive. This is a "dream" portfolio, he said.
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.