I’m worried about a lot of things, but not a recession

If the latest round of earnings reports taught us anything, it’s that traders aren’t always right when it comes to U.S.-China trade talks, Cramer said Monday as whispers of a potential trade summit kept stocks at bay.

Specifically, traders who bet against stocks like Nike and Starbucks when talks go south — usually assuming that they’ll be boycotted because they’re distinctly American brands — could have “the China trade” all wrong, he told investors.

“This earnings season has revealed some brutal truths about ‘the China trade’ that just don’t jive with the … conventional wisdom,” Cramer said. “We act like the winners and the losers from the trade war are obvious, but the reality’s a lot more nuanced than that. Many companies that should be hurting in the People’s Republic have been putting up some astonishing numbers, while others are being torn to pieces by increased competition or the slowing Chinese economy.”

White House officials have confused Wall Street with their statements on the trade talks in recent months, at times signaling progress and at times suggesting that the two sides were still far from reaching an agreement.

As a result, short-term stock-pickers have had to follow their instincts, Cramer explained. When tensions seem to be rising, they’ll usually choose to short-sell shares of top consumer brands, capital goods companies and technology giants, he said. Short-selling involves trying to profit on a bet that a company’s shares will decline in the near future.

Nike, Starbucks, Estee Lauder and Yum China all tend to fall in the first short-selling bucket, but if you ask the “Mad Money” host, that strategy “just hasn’t paid off.”

Click here for his full analysis.

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