Welcome to my latest video presentation. Below is a condensed transcript; the video contains additional details and several charts.

I remember a widely prevalent slogan of the peace movement during the Vietnam War era: Suppose they gave a war and no one came?

You could apply that saying to the supposed recession. What if the pundits gave a recession and no one came?

Analysts who have been insisting that we’re not in a recession were handed fresh ammunition with the latest U.S. jobs report, which delivered jaw-droppingly good news. The academic argument as to whether we’re witnessing a genuine recession just became more lopsided in favor of the optimists.

The latest economic numbers, especially the U.S. jobs report for July, undercut the argument that we’re in a recession. But it also increases the odds of more aggressive Federal Reserve tightening.

Hence the paradox. The robust economic data might not be so good for stocks.

The U.S. Bureau of Labor Statistics last Friday delivered a blockbuster jobs report for the month of July that served as a counterweight against the two consecutive quarters this year of negative gross domestic product growth (GDP).

The U.S. economy added 528,000 nonfarm payrolls in July, crushing the consensus estimate of 258,000. The headline unemployment rate dipped to 3.5% last month, topping estimates of 3.6% and matching the five-decade lows seen in early 2020.

The leisure and hospitality sector enjoyed the greatest jobs growth, with 96,000 payrolls added in July, led by expansion in food and drinking places.

Wage growth also jumped higher, as average hourly earnings climbed 0.5% for the month and 5.2% from the same time a year ago.

The U.S. has now completely recovered to pre-pandemic employment levels, with total payrolls hitting a fresh record in July. The rebound took 29 months, nearly three times faster than the recovery from the Great Recession of 2007-2009. These jobs gains were generated despite decelerating GDP growth, rising interest rates, and weakening consumer demand.

Read This Story: The Great Recession Debate: More Heat Than Light

Equities have staged a robust rally since their mid-June lows, supported by waning inflation fears, falling commodity prices, healthy corporate earnings growth, and lower bond yields.

The blended earnings growth rate for the S&P 500 for the second quarter is 6.7% as of market close August 5, compared to an earnings growth rate of 5.8% the week before and an earnings growth rate of 4.0% at the end of the second quarter (June 30). “Blended” combines actual results for companies that have reported and estimated results for companies that have yet to report.

Volatility and further dips certainly lay ahead, but the bear market likely ended in June.

The major U.S. stock indices last week closed higher, except for the Dow Jones Industrial Average (see video for details). Technology and other growth-oriented sectors have attracted investors again, despite Federal Reserve tightening.

Last Friday’s jobs report came on the heels of other encouraging data. The U.S. manufacturing sector grew in July, with the overall economy racking up a 26th consecutive month of growth, according to ISM’s survey of the nation’s supply executives.

The July Manufacturing PMI registered 52.8%, slightly down from the reading of 53% in June. However, July’s figure beat expectations and indicates continuing expansion in the overall economy.

The ISM non-manufacturing purchasing managers index for July also showed unexpected strength, coming in at 56.7%. The Business Activity subindex increased to 59.9% in July from 56.1% in June 2022.

Too much of a good thing?

However, sometimes on Wall Street, good news can be a mixed blessing. The recent spate of positive economic news can be construed as possibly worrisome for the stock market, because it stokes fears of higher inflation. The Fed is less likely to execute a dovish pivot when it considers rate hikes again in September.

Investors will now focus on the forthcoming July consumer price index (CPI) report, scheduled for release on Wednesday. The consensus expects the rate of headline inflation to moderate, largely due to the dramatic decline this summer in commodity prices. The trend in core CPI (excluding energy and food prices) warrants particular scrutiny, because that measure dictates the Fed’s monetary policy moves.

We’re already seeing signs that inflation is cooling. Most gasoline stations in the U.S. are currently charging less than $4.00 per gallon. Food prices are coming down as well. Perhaps it won’t be a long, hot summer of rising inflation after all.

In the meantime, in this volatile and risky market, where can you still find solid growth opportunities? I can sum it up with a single word: takeovers. You might have heard them referred to as buyouts, mergers, or acquisitions.

However, no matter what you call them, when a takeover is triggered, the profits that spill out have life-changing potential.

In this era of war, inflation and pandemic, corporate consolidation is the name of the game.

Even the whisper of a “mega-merger” can hand investors enormous returns. My colleague Nathan Slaughter, chief investment strategist of Takeover Trader, just pinpointed a potential takeover deal that could dwarf them all. Want to get in on Nathan’s next big trade? Click here for details.

John Persinos is the editorial director of Investing Daily.

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