Stocks have been struggling over the past few weeks as U.S. treasury yields have surged on strong economic data. The benchmark 10-year treasury yield is currently sitting right around a 16-year high, even as investors anxiously await Federal Reserve Chair Jerome Powell's speech Aug. 25.
"The market has looked at the rising yields as consistent with a better economy and what the market perceives as lower recession risk," Keith Lerner, co-chief investment officer at Truist Advisory Services, told Reuters, adding: "If yields continue to move higher, it’s going to be more challenging to get further valuation expansion."
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"Mad Money" host Jim Cramer -- despite noting news of damage from higher interest rates and persistent issues with home and vehicle affordability -- thinks the stock market isn't acting like a recession is on the way.
"Something's very wrong here. This market's not trading like we're headed for a recession," he said. "The stocks aren't saying it, even though the news articles say they are."
Citing corporate concerns about labor strikes and consumer health, Cramer maintained that the market doesn't seem to care.
"You can paint a pretty ugly picture here, but if we're truly headed into a serious slowdown, why does this market hate the slowdown stocks?" he said. "The ones that you're supposed to buy when you see the kind of action that we're getting from the news headlines. They've been a cascading nightmare," something that has been enhanced by rising bond yields.
And with a growing number of experts starting to come around to the idea that the Fed might actually achieve its goal of an economic soft landing in avoiding a recession, Cramer regardless thinks it's a good idea to look into ways to insulate your portfolio.
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"I don't know if we're headed for a slowdown, but I do know it makes sense to dip your toe into the consumer package good stocks, the true recession stocks, if only so that you'll have all your bases covered, and because they've gotten cheap," he said, noting that his two favorites are PepsiCo (PEP) -) and Mondelez (MDLZ) -).
"None of these recession stocks work if the economy stays white hot," Cramer added. "But they make for good protection if Powell says something really harsh on Friday that makes us terrified of a slowdown."
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