When Hot Stocks Get Too Hot

If you're feeling the urge to jump into stocks after the recent market rally, Jim Cramer has a message for you: slow down. The Mad Money host is cautioning investors against the temptation to chase stocks that have already seen massive gains, arguing that buying after a 30% or 40% run-up is often "a license to lose money."

It's classic FOMO territory, and Cramer's advice is simple: wait for better entry points instead of paying top dollar for stocks that have already had their moment in the sun.

Banking on Caution

Cramer is particularly focused on potential risks in the banking sector as earnings season approaches. While he acknowledges that banks are undervalued right now, he's warning that stocks like JPMorgan Chase (JPM) could take a temporary hit if CEO Jamie Dimon strikes a cautious tone during earnings calls, even in strong market conditions.

"By all means, own some unloved tech names, but save room for a quality consumer [stock]," Cramer advised, suggesting investors maintain a diversified approach rather than going all-in on any single sector.

The Bigger Picture on Market Risk

Cramer isn't alone in his caution. His warning follows a week where he advised against chasing oil stocks amid the Venezuela crisis, and it comes at a time when several market strategists are raising red flags about volatility.

Goldman Sachs recently warned that high valuations could trigger increased market swings if corporate earnings disappoint. Meanwhile, Fundstrat's Tom Lee has cautioned about a possible 15-20% correction in the second half of the year. That context makes Cramer's advice about waiting for better entry points particularly timely.

Despite the near-term concerns, Cramer has previously expressed optimism about banking stocks over the long haul, highlighting potential upside for investors who get the timing right.

Price Action: Over the past year, Invesco QQQ Trust, Series 1 (QQQ) and Vanguard S&P 500 ETF (VOO) have climbed 22.33% and 18.76%, respectively.