Jim Cramer: "Investors are betting a recession is coming"

Investors are betting the economy is slowing and a recession is on the way, Jim Cramer said.

That explains the defensive stock rallies in PepsiCo, Kimberly-Clark and Hershey, along with the roughly surge in cloud stocks Salesforce and Okta proof that.

”Defensive stocks can do just fine during a slowdown,” Cramer said.

Wall Street’s focus shifted after Federal Reserve Chair Jerome Powell announced Tuesday that the agency would monitor the economy for signs of weakness, Cramer said. The central bank in December tightened its monetary policy too much, and bulls are now hoping for economic activity to warrant an interest rate cut, he said.

Investors got a sign that the economy is slowing after payroll processing firm ADP revealed that businesses added 27,000 jobs in May. Cramer said the low reading suggests the non-farm payroll report Friday could be weak.

“Thanks to the magic of the Federal Reserve, we’ve entered a market, right now, where bad news for the economy is actually good news for stocks,” he said.

The bulls are looking to three events to put pressure on the Fed to reduce interest rates and spur more activity: falling oil prices, tariffs and the bond market.

Source: CNBC

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