Last week’s rally is a reminder to watch for a bounce during market downturns, Jim Cramer says

The stock market’s recovery last week is proof that investors should always watch for bounce, even when all seems hopeless, CNBC’s Jim Cramer said Monday.

“The most important lesson of last week is that you never want to get too negative, because once the market gets oversold, it doesn’t take much good news to create an explosive rebound,” Cramer said.

“When the whole market roars, you need to recognize that not everything has the same kind of staying power. Many downtrodden groups made a comeback thanks in part to short covering … but some other groups look a lot more durable,” he added. 

The “Mad Money” host said that he believes “consumer discretionary stocks” like Macy’s and companies in the travel sector including Delta Air Lines and American Express will be winners.

Cramer’s comments come following last week’s monster rallies as investors digested the news of the Russia-Ukraine War, the Federal Reserve’s quarter-percentage-point-rate hike and Covid outbreaks in Russia and China. All of the major averages finished their best week since November 2020 on Friday, with the S&P and 500 and Nasdaq surging for four consecutive days while the Dow Jones Industrial Average gained for five days.

The markets teetered Monday following Fed chairman Jerome Powell’s statement that the Fed could take more aggressive rate hikes for the rest of the year if necessary to combat surging inflation.

Cramer said that while investors should be careful to pick stocks with “staying power,” his overall position on only holding stock of money-making firms hasn’t changed.

“While the last week gave you a tremendous opportunity to reposition, it has not changed my fundamental thesis. … Stick to profitable companies with real products or real services, especially the ones that return capital to their shareholders,” he said.

Sign up now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.

Disclaimer