To us, it seems like the current stock market rally is the most hated of all time. Stocks keep hitting record high after record high. Yet, investors largely remain wary.
We think that wariness stems from Americans’ fear about the U.S. economy. For months, the media has been warning viewers about a possible incoming recession. And even though a recession hasn’t happened, Americans are still worried one may be coming soon.
But we’re confident the U.S. economy will not fall into a recession – now or anytime soon.
And as that becomes increasingly obvious, stocks will keep on partying like it’s the 1990s.
Diving Into the Jobs Data
Not so sure about the state of the U.S. economy?
Just look at the newly released February jobs data.
The U.S. economy added 275,000 jobs in February, more than the 200,000 expected by economists and the 229,000 jobs added in January. That’s really good job growth.
Throughout the 2010s, the U.S. economy averaged ~180,000 new jobs per month. Therefore, the labor market is currently growing at an above-average rate. Plus, after collapsing throughout 2021 and €˜22, job gains have also stabilized over the past year or so.
We see this as a rock-solid labor market.
And importantly, inflation pressures are also cooling right now.
Average hourly earnings rose 4.3% in February, down from 4.4% growth in January. Wage inflation has now trended downward in a pretty linear fashion from nearly 6% in early 2022 to around 4% today.
Given this trend, wage inflation is on track to fall to “normal” levels by later this year.
Huge job growth with falling inflation? This is what we call a “Goldilocks” economy – when economic activity is hot enough to keep the economy strong but not hot enough to spark inflation.
It is the ideal economy.
And that’s why we’re confident that stocks will keep soaring to record highs.
The Final Word
This is proving to be the most resilient economy in modern history. All logic said we should’ve fallen into a recession. But we didn’t. And it’s very likely that we won’t anytime soon.
As more and more investors realize this, more and more money will pour in the market – and stocks will keep soaring like they did in the 1990s.
Are you prepared for this stock market meltup?
If not, we have you covered.
We saw this stock market rally coming from a mile away.
Over the past 16 months, we’ve honed in on the market’s winning stocks. And we’re not done yet. We think the best is yet to come.
Find out which stocks we’re most bullish on these days.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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