CNBC's Jim Cramer on Tuesday presented a list of stocks he thinks will benefit from a collapse in stimulus talks.
Stock averages tanked late in Tuesday's session after President Donald Trump, in a tweet a little over an hour before the close, surprisingly called off negotiations on another spending measure until after next month's election.
After the sell-off, Cramer said there are parts of the market that will not be phased by the potential lack of additional support.
"The president's aides are conscious that many areas of the economy are red-hot right now and they'll stay hot regardless of what the government does," the "Mad Money" host said. "Plus, don't forget, the parts of the economy that need help are small businesses, and they don't trade publicly, so their weakness rarely filters through to the stock market."
With the U.S. economy still reeling from the pandemic-induced recession, another emergency spending bill is seen as a way to prevent the economy from dropping into an even deeper crisis.
Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi have held discussions for days on end in hopes of coming close to a compromise on a plan that would send out another round of direct checks to Americans and provide support for small- and medium-sized businesses challenged by the ongoing coronavirus pandemic.
Cramer suggested that investors not "overthink" the situation, given that the economy is split between the small- and medium-sized businesses that are struggling and the large publicly traded companies that are benefiting from the environment.
"The part that's working is mostly publicly traded companies. We have a V-shaped recovery ... in housing, a U-shaped recovery in autos, and some of the largest retailers never even experienced a downturn — think Walmart, Amazon, Costco, Target, Home Depot and Lowe's," Cramer said.
"All these work, regardless of what happens in Washington," he said.
The tweet from Trump, who just earlier in the day celebrated the recent gains made in the stock market, sent the major averages down more than 2% from their intraday highs.
The Dow Jones sold off almost 376 points for a 1.34% loss to close at 27,772.76. The S&P 500 and Nasdaq Composite dropped even further, tumbling 1.40% to 3,360.95 and 1.57% to 11,154.60, respectively, at the end of the session.
"Some people will argue that the lack of stimulus means we're headed for a recession. I don't think that's true as long as we get some kind of bailout by the end of the year," Cramer said. "But if you think we are headed for a real recession [your buy list] is straightforward."
Cramer pointed to defensive stocks such as PepsiCo, Conagra Brands and Campbell Soup, one stock he said is "too cheap to ignore." Bristol-Myers Squibb, Johnson & Johnson and Regeneron are three recession-proof drug stock plays, he said.
The U.S. economy is in need of another stimulus package, and a wide range of corporations will be forced to cut their forecasts without one, Cramer warned.
The technology sector will be one bright spot, however, and their stocks are worth buying into weakness, he added.
"Without [a stimulus package], numbers will have to come down for a whole host of companies, but not technology, because most tech supports the enterprise, not the consumer," Cramer said. "The enterprise, as I've said, is doing quite well. You can watch those sink a bit [lower] and then pick up some into weakness."
Disclosure: Cramer's charitable trust owns shares of Amazon, PepsiCo, Johnson & Johnson, Bristol-Myers Squibb and Costco.
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