What do we need to see before the markets can legitimately bottom? Jim Cramer told his Mad Money viewers on Thursday that the answer to that question is: more fear.
Too many investors, he said, feel that more interest rate hikes are already baked into stock prices. It's those investors that need to get scared and throw in the towel before we'll see a real bottom.
Cramer explained that the Federal Reserve's mandate is supposed to be keeping inflation under control, but instead the Fed is focused on potential inflation, fearing full employment -- which is supposed to be the best part of the economic cycle.
But as earnings season continues, we're seeing more signs of weakness in our economy, he said. Loan growth is slowing at many of the regional banks, as more small businesses must pay up for labor rather than borrow for future growth.
If these fears were already baked into stock prices, would be see declines like we did today? Would shares of Home Depot (HD) - Get Home Depot, Inc. (HD) Report fall from $215 to $185 as they have in the past few weeks?
Cramer said there's still far too much greed and complacency in the market to produce a significant bottom. That doesn't mean that investors can't start nibbling at their favorite stocks, but it does mean they should expect more volatility like we saw today.
Over on Real Money, Cramer says the shift from regional to national banks is stark. Get more of his insights with a free trial subscription to Real Money.
Don't Waste This Selloff
A selloff during earnings season is the best kind, Cramer told viewers, because the companies just got done telling us how well they're doing. That's why investors should be ready to buy the best companies as the market heads lower. Cramer listed several stocks he'd consider.
United Continental (UAL) - Get United Airlines Holdings, Inc. Report just raised its forecast for the third time this year, a solid sign that things are going well. Cramer said this stock remains incredibly cheap. Citigroup (C) - Get Citigroup Inc. Report reported among the best quarters of all the banks, and does a lot of business overseas, shielding it from our domestic rate-hike fears.
UnitedHealth Group (UNH) - Get UnitedHealth Group Incorporated Report is another company that just posted a beat-and-raise quarter and remains a Cramer favorite in the healthcare group. And finally, Cramer said, investors should circle back to PepsiCo (PEP) - Get PepsiCo, Inc. Report , which is doing great, has a solid buyback and a 3.4% dividend yield.
Cramer and the AAP team are initiating a position in Viacom Inc. (VIAB) - Get Viacom Inc. Class B 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.
Power Rankings: Tech
In this installment of his "Power Rankings," Cramer dove into the technology sector to find the best companies with the brightest futures.
Topping the list was Apple (AAPL) - Get Apple Inc. (AAPL) Report , an Action Alerts PLUS holding and the only trillion-dollar company left standing. Apple trades for less than 16 times earnings and Cramer reiterated investors should own Apple and not trade it. Second place went to Salesforce.com (CRM) - Get salesforce.com, inc. Report , the company that invented the cloud. Every pullback in Salesforce has been a buying opportunity.
Adobe Systems (ADBE) - Get Adobe Inc. Report made the list at No. 3, as this cloud company is growing revenues at 20% a year. Cramer also endorsed Microsoft (MSFT) - Get Microsoft Corporation (MSFT) Report , which is growing sales at 17%, yet trades for just 22 times earnings.
Finally, Cramer recommended MasterCard (MA) - Get Mastercard Inc. (MA) Report , a stealth technology play that has higher growth than Visa (V) - Get Visa Inc. Class A Report and more international exposure.
Off the Tape: Green Growth Brands
In his "Off The Tape" segment, Cramer spoke with Peter Horvath, CEO of the privately-held Green Growth Brands, a Canadian-based company aiming to bring cannabis-infused products to customer via a superior retail experience. Horvath previously worked at such brands as American Eagle, Victoria's Secret and DSW shoes.
Horvath said the Green Growth team has decades of experience in successful retailing and building great brands. He said when his team visited the top 100 cannabis retailers in the U.S., they found stores not living up to their potential and a disorganized and confusing consumer experience.
Horvath said Green Growth is working on multiple channels for both CBD- and THC-based products. The company aims to come public next year.
Am I Diversified?
In the "Am I Diversified" segment, Cramer spoke with callers and responded to tweets sent via Twitter to @JimCramer to see if investors' portfolios have what it takes for today's markets.
The first portfolio included Apple, Amazon, Blackstone (BX) - Get Blackstone Group Inc. Class A Report , JPMorgan Chase (JPM) - Get JPMorgan Chase & Co. (JPM) Report and General Dynamics (GD) - Get General Dynamics Corporation (GD) Report .
Cramer said he'd bless this portfolio, even though Apple and Amazon often trade together.
The second portfolio's top holdings included Alibaba (BABA) - Get Alibaba Group Holding Ltd. Sponsored ADR Report , KeyCorp (KEY) - Get KeyCorp (KEY) Report , DowDuPont ( DWPT) , Baozun (BZUN) - Get Baozun Inc Sponsored ADR Class A Report and UBS (UBS) - Get UBS Group AG Report .
Cramer identified two pairs in this portfolio and suggested selling UBS and Baozun to add a healthcare stock like Merck (MRK) - Get Merck & Co., Inc. (MRK) Report and a retailer like Costco (COST) - Get Costco Wholesale Corporation Report .
The third portfolio had Apple, Chegg (CHGG) - Get Chegg, Inc. Report , Kratos (KTOS) - Get Kratos Defense & Security Solutions, Inc. Report , Paypal (PYPL) - Get PayPal Holdings Inc Report and Marathon Petroleum (MPC) - Get Marathon Petroleum Corporation (MPC) Report . as its top five stocks.
Cramer blessed this portfolio as properly diversified.
The final portfolio's top stocks were Abbott Labs (ABT) - Get Abbott Laboratories Report , Amazon, Cypress Semiconductor (CY) - Get Cypress Semiconductor Corporation Report , Southwest Airlines (LUV) - Get Southwest Airlines Co. Report and Starbucks (SBUX) - Get Starbucks Corporation Report .
Cramer said this portfolio was also terrific.
In the Lightning Round, Cramer was bullish on Arrowhead Research (ARWR) - Get Arrowhead Pharmaceuticals, Inc. Report , AT&T (T) - Get AT&T Inc. Report , Verizon (VZ) - Get Verizon Communications Inc. Report , HollyFrontier (HFC) - Get HollyFrontier Corporation (HFC) Report , Brinker International Inc (EAT) - Get Brinker International, Inc. Report , McDonald's (MCD) - Get McDonald's Corporation (MCD) Report and Wendy's (WEN) - Get Wendy's Company Report .
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At the time of publication, Cramer's Action Alerts PLUS had a position in VIAB, C, UNH, AAPL, CRM, MSFT, MMM, JPM, PYP, ABT.