Jim Cramer offers his favorite stock picks for 3 possible recession scenarios

CNBC’s Jim Cramer on Thursday gave investors his top stock picks for three different recession outcomes.

“We’ve got mild, we’ve got moderate and we’ve got severe. … . Can we avoid a recession altogether? There’s always the chance,” but investors shouldn’t hold their breath, he said.

Investors have piled into tech stocks this week, betting on a market bottom and driving this week’s rally. All the major averages gained on Thursday.

The “Mad Money” host said that while he’s outlining three possible scenarios for the economy and his favorite stocks for each, investors shouldn’t build their portfolios by betting on just one outcome. “You need something for every possibility,” he said.

Here are his top stock picks for a possible mild, moderate or severe recession.

Cramer said a mild recession is possible, since the banks recently reported strong quarters, many people have money saved from during the pandemic and the job market is still strong.

“Companies will still have a downturn in their earnings, but many stocks have already come down hard in anticipation of a deeper recession. … They’re acting quite well here because they’re down so much,” he said.

Here is his list of stocks suitable for a mild recession:

If Wall Street starts to expect a moderate recession, investors will have to pull in their horns and be more selective about their choices, according to Cramer.

“You can buy the higher yielding stocks, as interest rates will start to trend down, reducing the bond market competition. But you’ve got to only buy high yielders that can still make their numbers,” he said.

Here is his list of stocks suitable for a moderate recession:

In the case of a severe recession, “you have to buy the ultimate defensive plays. … Anything related to advertising, tech and the industrials will crush you,” Cramer said.

Here is his list of stocks suitable for a severe recession:

Disclosure: Cramer’s Charitable Trust owns shares of Amazon, Constellation Brands, Coterra, Johnson & Johnson and Pioneer Natural Resources.