The interpretation on Wall Street of the latest jobs report has varied widely, with another robust month of hiring either bolstering confidence in a strong economy or raising concerns about the likelihood of a near-term Federal Reserve rate cut.

The labor market is showing remarkable growth, which gives the Biden administration bragging rights heading into an election year. But that growth also is causing ripples of anxiety on Wall Street.

My view is summed up by a remark from the late, great Jerry Garcia: “Too much of a good thing is just about right.”

Below, I’ll explain why the long-term outlook for the stock market still looks bullish. The balance between economic growth and deflationary trends is just about right.

Overheating jobs market?

March’s payroll report, revealing the addition of 303,000 new jobs, exceeded expectations and represents the strongest monthly gain in nearly a year. Sectors such as health care, government, construction, and leisure & hospitality experienced notable hiring, with the latter sector returning to pre-pandemic employment levels.

The current 3.8% unemployment rate (down from 3.9%) is far below what economists consider “full employment,” typically defined as unemployment at 5% or below. The United States is about as close to full employment as the country has managed to achieve outside of World War II mobilization.

Investors are worried that an overheated economy will delay monetary easing. However, while job growth has accelerated in recent months, indications point towards a gradual slowdown later this year.

The unemployment rate has now come in below 4% for 26 straight months, the longest streak since the late 1960s. Although analysts anticipate a modest uptick in unemployment later this year, historical data suggests it will remain comfortably below recessionary levels.

Government metrics indicate that inflation edged slightly higher this year during January and February. However, it’s likely that this uptick predominantly stems from what’s commonly referred to as the January effect, extending its impact into February. This phenomenon sees numerous businesses adjusting their prices as the new year gets underway. The Fed anticipates that inflation will resume its downward path in the coming months.

Low unemployment rates historically correlate with strong stock market performance. At the same time, inflation-fighters at the central bank should be encouraged by signs of softening employment conditions. Average hourly wages in March were up 4.1% from a year earlier, the smallest year-over-year increase since mid-2021.

However, the recent rise in the benchmark 10-year U.S. Treasury yield (TNX) remains an ominous portent and weighed on stocks last week (see the following table):

The Fed is on course to cut rates; Fed Chief Jerome Powell has explicitly said so. But the timing and magnitude of those rate cuts remain uncertain.

Market sentiment hinges on forthcoming economic indicators, with the consumer price index (CPI) and producer price index (PPI) reports this week serving as pivotal catalysts.

On Monday, the main U.S. stock market indices closed mixed as follows:

• DJIA: -0.03%
• S&P 500: -0.04%
• NASDAQ: +0.03%
• Russell 2000: +0.50%

The TNX popped higher by 1.05%, to close at 4.42%.

The week ahead…

The following economic reports, scheduled for release in the coming days, bear close scrutiny:

NFIB optimism index (Tuesday); CPI and the minutes of the Federal Open Market Committee’s March meeting (Wednesday); initial jobless claims and PPI (Thursday); and consumer sentiment (Friday).

The big news, of course, will be the CPI and PPI reports. Furthermore, various Fed officials are slated to speak throughout the week. Their words will have the power to move markets.

The bullish narrative remains in place, although high valuations (especially among technology stocks) suggest near-term pullbacks are in the cards. Buy quality stocks on the dips.

Read This Story: Your Guide to Criminal Capitalism: How to Spot The Next FTX

Editor’s Note: You’ve probably read that Sam Bankman-Fried was recently sentenced to 25 years in prison by a federal judge, a year and a half after Bankman-Fried’s crypto startup, FTX, suddenly crashed.

That said, cryptocurrency is on the cusp of a roaring bull market in 2024. The FTX scandal is actually an encouraging reminder that crypto isn’t a lawless “wild west.” Bad players in the crypto realm are eventually brought to justice.

The FTX scandal also underscores the need for crypto investors to seek expert guidance, to separate the solid investments from the scams.

Every portfolio should have exposure to crypto. But you need to be informed, to make the right choices. The good news is, the experts at Investing Daily have done the homework for you.

Want to tap crypto’s massive money-making opportunities, but with mitigated risk? Start receiving our FREE e-letter, Crypto Investing Daily. Click here now!

John Persinos is the editorial director of Investing Daily.

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