Strong Jobs Report Confirms the 2024 Bull Thesis for Stocks

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The U.S. economy shows no signs of plunging into a recession. My advice? Take that theory and toss it in the nearest trash bin.

The January Nonfarm Payrolls Report revealed that the U.S. economy added an impressive 353,000 jobs last month, with increases in hiring across every sector except one.

This does not look like an economy on the brink of collapse. Instead, it shows remarkable resilience, with a bullish catalyst in potential interest rate cuts later this year.

The likely outcome is robust and accelerating economic growth for the remainder of the year, accompanied by rising stock prices.

Why the Jobs Report Paints a Positive Economic Picture

The big thing for us isn’t the strong job growth number, per se. That’s awesome to see. But the real positive in the jobs report? Wage growth.

Average hourly earnings increased by 4.5% year-over-year in January, a significant rise. More importantly, according to current estimates from the Cleveland Fed, inflation increased by less than 3% in January. This indicates that real wages grew by more than 1.5% in the same month.

This growth represents one of the largest jumps in the past three years!

Moreover, this trend continues a multi-month streak where wage growth has outpaced inflation. Throughout most of 2021 and 2022, inflation exceeded wage growth. This pattern shifted in May 2023 when wage growth surpassed inflation. Since that time, wage growth has consistently outpaced inflation.

This trend is a very positive sign for the economy.

Consumers drive approximately 70% of the U.S. economy. The economy thrives when they spend, particularly when their purchasing power increases or when wage growth exceeds inflation.

As the chart below illustrates, stocks generally perform well when real wage growth is positive. Real wage growth has been positive since May of the previous year. With inflation expected to continue declining and wage growth remaining around 4%, it appears that real wage growth will stay positive for the near future.

If so, stocks should keep soaring.

The Final Word

We’ve been saying this for a while now. The U.S. stock market is in the early innings of a multi-year bull market powered by AI. We’re now entering Year 2 of this bull market. We think it lasts into 2030, and that by the end, this tech bull run will go down as the biggest in history – bigger than even the Dot Com Boom of the 1990s that made so many investors filthy rich.

Today’s jobs data seems to corroborate that thesis.

Buckle up, folks, because this bull market is about to heat up.

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On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

P.S. You can stay up to speed with Luke’s latest market analysis by reading our Daily Notes! Check out the latest issue on your Innovation Investor or Early Stage Investor subscriber site.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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