Welcome to my latest Mind Over Markets video presentation. The article below is a condensed transcript; see my video for additional details and several charts.

We’re witnessing a hated bull market. Stocks keep rising, but Wall Street still seems perturbed. The gloomsters insist on warning us that maybe we’re in a bear market rally, that the surge of the NASDAQ means we’re heading for a “tech wreck,” that inflation is still too sticky, that the artificial intelligence (AI) boom is an echo of the dot-com disaster of 1999…the dire predictions go on and on.

Perhaps what galls the pessimists the most is that the stock market has the temerity to remain on an upward trajectory, despite signs of an impending recession. Let’s examine the data to see why this unloved rally keeps going.

Job growth picked up steam in May, although the lagging effect of higher interest rates is likely to soon slow the pace of that growth.

The U.S. Department of Labor reported last Friday that 339,000 new payrolls were added last month, roughly double consensus expectations and up from the previous month. This was the best month of hiring since the gain of 472,000 in January and a modest re-acceleration over the last several months, despite recessionary headwinds.

The headline unemployment rate rose to 3.7%, still the lowest since 1969. The mixed data that show job growth with a rise in unemployment indicates that the job market stands on the inflection point of a slowdown.

Other reports confirm the countervailing forces that are keeping the labor market in check. Job openings remain three million above pre-COVID openings, but they’ve fallen by nearly two million over the past year, including a decline of one million just over the last four months. Job postings are on a gradual downward slope as well, with employers cutting back in expectation of a recession.

The DOL reported last Thursday that for the week ending May 27, initial claims edged higher to 232,000, an increase of 2,000 from the previous week’s revised level and below the estimate of 235,000.

According to ADP last Thursday, private sector employment increased by 278,000 jobs in May, well ahead of the 180,000 estimate, and annual pay was up 6.5% year-over-year.

However, ADP also reported that wage growth has decelerated. Job changers saw a gain of 12.1%, down a full percentage point from April. For job stayers, the increase was 6.5% in May, down from 6.7%.

The ADP report stated: “This is the second month we’ve seen a full percentage point decline in pay growth for job changers. Pay growth is slowing substantially, and wage-driven inflation may be less of a concern for the economy despite robust hiring.”

So moving forward, what can we make of this conflicting data? The upshot is this: The jobs market remains healthy, but the data counter fears of a wage-price spiral. The economy is slowing sufficiently to cool inflation, but it’s not on the verge of cratering. That’s good news for stocks.

The data help explain why the major indices have surged so far this year, despite headwinds such as the continuing Russia-Ukraine war, elevated interest rates, and an impending recession.

During the past holiday-shortened week, we witnessed a relief rally, after Congress and the White House reached an agreement on the federal debt ceiling.

Last week’s equity rise was broad-based, a good sign because we’ve witnessed “bad breadth” lately due to a divergence between the technology sector and the overall market. The mania over AI has boosted the NASDAQ, but the New York Stock Exchange Advance/Decline line has slipped. That said, market leadership is starting to broaden.

Some analysts fear that we’re seeing a tech bubble about to burst, akin to the Internet-fueled boom and bust of 1999. However, the difference this time around is that the 1999 bubble was largely driven by rampant speculation in unprofitable companies, whereas the AI bonanza is largely fueled by hugely profitable mega-cap stalwarts.

Mentions of AI during the quarterly earnings calls for tech behemoths Alphabet (NSDQ: GOOGL), Facebook parent Meta Platforms (NSDQ: META), Microsoft (NSDQ: MSFT), Amazon (NSDQ: AMZN), and Apple (NSDQ: AAPL) rose exponentially compared to the same quarter a year ago, according to Statista. We’ll see if Big Tech’s rally eventually spreads to the broader market and officially pulls the Dow and S&P 500 out of bear territory.

The S&P 500 remains well above its 50- and 200-day moving averages, and the CBOE Volatility Index (VIX) hovers below 15. A reading of the VIX below the threshold of 20 indicates a lower risk environment.

The week ahead…

Here are the salient economic reports scheduled for release this week:

S&P U.S. Services PMI, factory orders, ISM services (Monday); U.S. trade deficit, consumer credit (Wednesday); initial jobless claims and wholesale inventories (Thursday).

Editor’s Note: As I explain in my video presentation, the stock market rally appears to have legs. But if you’re still nervous about the risks I’ve just described, consider the time-proven advice of my colleague, Dr. Stephen Leeb.

As chief investment strategist of The Complete Investor, Dr. Leeb has produced a special report on how to survive the tectonic shifts facing the financial world.

Amid the upheavals he sees ahead, Dr. Leeb says the most profitable investment opportunity won’t be found among conventional assets. His research indicates it will be a tiny under-the-radar play. Click here for details.

John Persinos is the editorial director of Investing Daily.

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