The market is developing a thesis that is the opposite of what we want to see, says Jim Cramer
Speakers
Jim Cramer
— Host, Mad Money
Summary
Jim Cramer says the market is being led by the wrong groups—defensive consumer packaged goods and oils—while banks sell off, a combination he sees as a warning sign of recession risk. He recommends owning defensive hedges like Procter & Gamble and JNJ, notes oil may rise on Iran/Venezuela uncertainty with Exxon and Chevron as leaders, and flags bank stocks as unattractive amid credit-card rate-cap concerns. In caller segments, he says AutoZone is a buy after a temporary stumble but Southern Copper is too extended to add.
- Cramer says the wrong leadership groups—consumer packaged goods and oils—are winning while banks fall.
- He warns a 10% credit card rate cap would be damaging, though he thinks it is unlikely.
- He recommends defensive hedges, specifically Procter & Gamble and JNJ, with Colgate and Merck as optional.
- He expects oil to rise on Iran and Venezuela uncertainty and names Exxon and Chevron as leaders.
- He views bank stocks as under pressure and unattractive amid the rate-cap risk.
- He tells a caller AutoZone is a buy after an inconsistent quarter and sees better results ahead.
- He tells another caller Southern Copper is late and too extended to add.
- He teases a Biohaven interview after positive JPM healthcare conference news.
Ideas
Bank stocks pressured by cap risk
Cramer says bank stocks are in free fall and the market reaction to bank earnings was miserable. He argues the perceived risk that the president could cap credit card rates at 10% is driving money out of banks and other sectors because banks would stop lending to most consumers, even though he thinks such a cap is unlikely to become law.
J&J can thrive in weak economy
Cramer says J&J can thrive in a weak economy because its products, especially medicine and consumer health items, are needed regardless of the economic backdrop. He thinks the stock deserves to go higher, though not at its recent pace, as money managers rotate into defensives and away from higher-multiple growth names like Eli Lilly; he lists JNJ as a hedge.
P&G is a defensive hedge
Cramer says P&G is a defensive hedge because its products are non-discretionary and the company has already warned that business is weak, so expectations are low; even if results are bad, P&G should hold up better than cyclicals. He bought P&G for the charitable trust as a hedge and suggests investors may want a similar hedge.
Oil higher on geopolitical risk
Cramer says oil looks headed higher despite finishing the day lower because the president's $50 barrel plan is going wrong amid uncertainty in Iran and Venezuela; taking out Iran's rulers would push oil higher, while Venezuela's leaders would push it lower. He identifies Exxon and Chevron as the real market leaders, citing tremendous CEOs and long historic records, though he warns their leadership is problematic because energy costs act as a tax on the rest of the economy.
Southern Copper is late and extended
Cramer says Southern Copper has had a parabolic move, is no longer cheap, yields only about 1.98%, and is up 25% this year. He likes the company but thinks the caller is late and cannot condone adding to the position.
Buy AutoZone after temporary stumble
Cramer says AutoZone is down because investors disliked one inconsistent quarter from an otherwise extremely consistent company. He thinks the next quarter will be better and that the company always pivots; with growth still good and a lower P/E than O'Reilly, he would be a buyer.
