Cramer: Expect more volatility until the bond market finds some stability

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    The stock market will continue to be volatile until the bond market finds some stability, CNBC’s Jim Cramer said Thursday.

    Investors, however, “took a step in the right direction” in the day of mixed trading, he said. The Dow Jones Industrial Average climbed nearly 100 points the day after suffering its worst session of 2019. The S&P 500 rose 0.25% while the tech-heavy Nasdaq Composite dipped 0.09%.

    “As long as Treasury yields keep plummeting, investors will remain unsure of themselves. At least today, they finally found some stocks to buy along with bonds,” the “Mad Money” host said. “It’s just that they’re the wrong stocks, the recession stocks, not the kind of leaders we want to get behind.”

    Discretionary stocks, whose underlying companies perform well during an economic slowdown, were able to rally. Names like Kimberly-Clark rose 1.87% and Procter & Gamble gained 1.38%, he noted.

    “Think the foods, the drugs, and the turbo-charged secular growth stories that can transcend the entire business cycle, which there are very, very few,” he said.

    Big tech and industrial equities, on the other hand, continued to slide. Shares of Cisco tumbled nearly 8% after the company reported revenue in China plunged 25% in the last quarter and delivered a forecast below analyst estimates. The earnings report revealed markets overseas are weakening, Cramer said.

    Additionally, he said, foreign investors want out of the low returns that their bond markets are yielding, he continued. German Government Bonds, for example, are all sporting negative returns. U.K. Government Bonds are yielding less than 1%. U.S. Treasurys continue to fall, but their yields range from mid- to high-1%.

    “Investors in the rest of the world are … are swapping out of the debased euro and their lousy bonds with negative interest rates so they can have it their way in our market,” Cramer said. “When long-term interest rates plummet like this, it’s not just a product of demand from overseas. It’s also a sign of fear, fear that we’re going into a recession.”

    Still, the American economy is robust with low unemployment, he said.

    Walmart turned in a top and bottom line beat and raised guidance in its second quarter, a sign that the American consumer is still spending money. The stock jumped more than 6%. That juxtaposes the more daunting results that Macy’s turned in on Wednesday.

    Cramer said he trusts that Walmart is telling a better story about the economy than Macy’s.

    “So, which is it, a boom or a bust?” he asked. “I think that’s an entirely false false dichotomy. The truth is, we’re muddling along.”

    WATCH: Cramer talks bonds, slowdown stocks, and the state of the market

    Disclosure: Cramer’s charitable trust owns shares of Cisco.

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