Scott Mlyn | CNBC
Investors should be careful not to buy or sell stocks based on last week’s brief inversion of the yield curve in the bond market, CNBC’s Jim Cramer warned on Monday.
Cramer was skeptical about buying the Dow Jones Industrial Average‘s 300-point advance at the open on Wall Street, which was playing out against the backdrop of continuing bond yield stabilization.
“Everything seems like a trap now,” Cramer said on CNBC’s “Squawk Box.” “It was a trap to sell off the inverted, and now they have to go buy back on the uninverted. What happens if we get inverted again?”
Last Wednesday, stocks tanked after the 10-year Treasury yield briefly inverted and dipped below the 2-year for the first time since before the 2008 financial crisis and subsequent Great Recession.
Such a move preceded every recession over the past 50 years.
“The idea that we uninverted the yield curve is something that lasts for, who knows, like an hour,” the “Mad Money” host said, facetiously, arguing against reading too much into the inversion theory.
Over the weekend, White House trade advisor Peter Navarro played down Wednesday’s inversion, saying technically it was more flat than inverted. For a true inversion, he argued, the spread would need to have been much larger. President Donald Trump said he does not see a recession on the horizon.
If the Dow were to hold on to its early gains by Monday’s close, it would erase all of Wednesday’s 800-point sell-off, the worst single-session of the year.
Cramer said he understands why investors might be suspicious of the economy, given the track record of inversions as recession indicators and the concerns about global economic growth due to the U.S.-China trade war.
Cramer said he hears more doom and gloom in the media than he does from companies. “I do feel like things are worse when I listen to people talk, than reality,” he said.