Strong Labor Market Supports Equities
Strong economic growth and robust labor market conditions support equity valuations despite inflation concerns
Too little corroboration in the last 3 days to call a trend (13 articles). Watching for it to gain traction. It's spreading across SPX & NDX — a theme crossing asset classes.
Recent data shows personal spending rising 0.2% month-over-month (above the 0.1% expectation) and personal income rising 0.4% month-over-month (above expectations), indicating robust consumer activity and income growth that support equity valuations despite ongoing inflation concerns. This economic resilience provides fundamental justification for current market levels.
Consumer spending and income growth directly influence corporate profit margins and revenue growth across the economy, which are the ultimate drivers of equity valuations. When these metrics remain strong, they reduce the probability of earnings disappointments and support the case for maintaining or expanding equity allocations, affecting risk appetite across asset classes.
Mainstream financial press is carrying this — attention has broadened beyond specialist outlets.
"July personal spending rose +0.2% m/m, stronger than expectations of +0.1% m/m. Also, July personal income rose +0.4% m/m, stronger than expectations of +0.2% m/m"
"July personal spending rose +0.2% m/m, stronger than expectations of +0.1% m/m. Also, July personal income rose +0.4% m/m, stronger than expectations of +0.2% m/m."
"Stocks also found support on some better-than-expected US economic news. The Aug Empire manufacturing survey general business conditions index unexpectedly rose +5.0 to a 4.5-year high of 20.6, stronger than expectations of a decline to 10.0."
"Fresh data showed U.S. producer prices were unchanged in July as goods prices fell and the cost of services increased marginally, while the number of Americans filing claims for unemployment benefits increased moderately last week, pointing to a stable jobs market."
"Job gains were led by lower-income households, while their annual after-tax wage growth surpassed that of higher-income households for the first time since December 2024... Alongside strong job growth, we have also observed a rise in job-to-job movements disproportionately boosting lower-income pay growth."
"Stocks also found support on today's better-than-expected US economic news, including weekly jobless claims, Q2 nonfarm productivity, and Q2 labor costs. US weekly initial unemployment claims rose by +1,000 to 199,000, showing a stronger labor market than expectations of 205,000."
"The weight of the evidence continues to support giving the bull market in stocks the benefit of the doubt, even as we experience more bumps along the way... Earnings remain our north star, the economy continues to show resilience, market participation has broadened, and valuation excesses have largely been worked off."
"The main foundations supporting the bull market are still strong. One major reason is strong economic growth. The US economy has continued to expand, giving companies and investors confidence even as inflation remains a concern. The US unemployment rate was 4.2% in June. That level remains close to historic lows, showing that the labor market has not suffered a major collapse."
"Fed Chair Warsh were supportive of stocks when he said the US economy is resilient, growing at a solid pace, and that the labor market is broadly stable."
"Also, upbeat comments from Fed Chair Warsh were supportive of stocks when he said the US economy is resilient, growing at a solid pace, and that the labor market is broadly stable."