On the evening of August 1, 2026, Beijing time, the July nonfarm payrolls report released by the U.S. Department of Labor became a focal point for global financial markets. The data showed that nonfarm employment in the U.S. increased by 255,000 in July, significantly exceeding the market expectation of 180,000, while the unemployment rate further dropped to 3.8%, and the average hourly earnings year-on-year growth reached 3.9%. This better-than-expected performance not only led to a short-term rally in U.S. stock futures after the data release but also once again brought the topic of whether U.S. stocks are worth holding long-term to the forefront.
I. Why are nonfarm data so important?
Nonfarm employment data is a core indicator of the labor market released monthly by the U.S. Department of Labor, directly reflecting the creation of jobs in non-agricultural sectors. Investors closely monitor this data because the employment situation is closely related to the U.S. economic cycle, monetary policy, and even corporate profitability. Generally, strong employment signifies a strong willingness for corporate expansion and stable household income, which in turn supports consumption—the main engine of the U.S. economy. Furthermore, nonfarm data is one of the variables the Federal Reserve frequently references when adjusting interest rates.
Looking back over the past five years, nonfarm data has often shown a "synchronous resonance" with the performance of U.S. stocks. When job growth exceeds expectations, the market interprets this as solid economic fundamentals and rising corporate earnings expectations, usually leading to positive stock price performance; conversely, when the data is significantly below expectations, it can trigger concerns about economic recession, leading to a pullback in risk assets. Therefore, the strong performance of the July nonfarm report has largely laid a positive tone for the performance of U.S. stocks in the second half of the year.
II. What are the highlights of the July report?
Looking at the detailed data, the July nonfarm report presented three main highlights:
* Comprehensive employment rebound: The addition of 255,000 jobs far exceeded expectations, with the service sector contributing the main increase. Industries such as leisure and hospitality, education and health, and professional and business services all performed strongly. Furthermore, manufacturing employment also showed positive growth, indicating that the goods production sector was not significantly dragged down by high interest rates.
* Low unemployment rate maintained: The unemployment rate of 3.8% was flat compared to the previous month, remaining in the full employment range for several consecutive months, which indicates that the supply and demand in the labor market remain tight. The labor force participation rate remained around 62.7%, consistent with pre-pandemic levels, meaning more age-eligible people entered the labor market and were able to find jobs.
* Stable wage growth: The average hourly earnings increased by 3.9% year-on-year. Although slightly lower than the previous 4.0%, it is still above the current inflation rate of about 3%, maintaining real purchasing power and providing a medium-to-long-term positive for consumer spending. The moderate slowdown in wage growth also helps alleviate concerns among corporations about cost pressures, thereby supporting profit margins.
III. Market reaction and policy expectations
After the data release, U.S. stock index futures rose rapidly, with the Nasdaq 100 futures index rising by over 1% at one point, and the S&P 500 futures index also rising in tandem. In the bond market, the 10-year U.S. Treasury yield rose to 4.35%, reflecting the market's cooling expectations for an interest rate cut by the Federal Reserve. According to the CME FedWatch tool, traders reduced the probability of a September rate cut from 62% before the data release to 45%, while the probability of a December rate cut remained around 70%. We believe that this strong employment report actually gives the Federal Reserve more policy space—the economy is not urgently in need of rate cuts for stimulation, so the Fed can observe inflation trends without rushing. For US stocks, the uncertainty surrounding interest rate policy has actually decreased: the Fed is likely to maintain high interest rates for longer, but corporate earnings resilience is also improving in tandem, creating a new balance between the two. In fact, since the Fed ended its tightening cycle in the second half of 2025, the market has gradually adapted to the "higher for longer" interest rate environment, and companies are actively adjusting their operating strategies to cope with rising financing costs.
IV. Why US Stocks Remain a Core Choice for Global Investors
In the section "Why Choose US Stocks," we repeatedly emphasize the unique advantages of the US stock market. The July nonfarm payroll data is just one example, revealing the deep resilience of the US economic structure. We examine this from three dimensions:
1. Corporate Earnings and Innovation Capability
US listed companies house the world's most advanced technology, healthcare, and consumer brands. The industrial dividends from AI continue to be released, with sectors such as cloud services, semiconductors, and software continuously creating above-expectations performance. Even traditional industries are improving efficiency through digital transformation. Strong employment data means that companies still have the capacity to hire and invest, and earnings expectations are continuously being raised during the Q2 earnings season, which is the fundamental support for the long bull run of US stocks. Taking tech giants as an example, their capital expenditure plans for 2026 have not been cut but are instead focused on building generative AI infrastructure, investments that will translate into revenue growth for the coming years.
2. Liquidity Environment and Capital Concentration Effect
Despite interest rates remaining relatively high, the depth and liquidity of the US stock market are irreplaceable. Global funds, sovereign wealth funds, and retail investors continuously allocate capital to US stocks. Recent data shows that US stock funds have experienced net inflows for several consecutive weeks, which is not accidental, but rather because the US stock market system is mature, information is transparent, and the compliance system is well-established, which better protects investor rights. Compared to some markets in Europe and Asia, US stocks have lower transaction costs and richer derivative tools, meeting the risk management needs of different types of investors.
3. Macro Fundamentals Support
The positive news from the nonfarm payroll data is not a short-term pulse. Low unemployment, rising wages, and robust consumption form a positive cycle in the macro fundamentals. In contrast, some economies in Europe and Asia face structural problems such as sluggish growth and aging populations, causing global capital to naturally choose the US as a "safe haven" and a "growth pole." Furthermore, the US demonstrates stronger risk resistance in geopolitical turmoil due to its self-sufficiency in energy, food, and technology. This also explains why US dollar assets remain the preferred choice for international capital even amid frequent geopolitical conflicts in 2026.
V. How Should Investors Respond?
Faced with better-than-expected economic data, individual investors can adopt the following strategies:
* Do not excessively chase short-term expectations of interest rate cuts: interest rate policy is only one variable affecting US stocks; the earnings fundamentals are the root. Focus on companies with stable earnings growth and ample cash flow by looking at quarterly corporate reports and industry trends.
Focusing on high-dividend and buyback stocks: Companies with stable earnings and ample cash flow reward shareholders through buybacks and dividends, providing a solid guarantee for long-term investment in US stocks. For example, nearly one-third of S&P 500 constituents have a dividend yield exceeding 2%, and the scale of buybacks remains at historic highs.Diversifying industry allocations: Non-farm payroll data demonstrates the resilience of the service sector, but the productivity revolution brought by artificial intelligence is also worth noting. Maintaining a balance between traditional value stocks and emerging technology stocks can reduce portfolio volatility. It is recommended that investors adopt a "core plus satellite" approach, using broad-based index funds as the base and supplementing with sector-thematic ETFs to capture structural opportunities.VI. Conclusion
The US stock investment environment in 2026 is no longer determined by a single monetary policy. Strong employment data indicates that the US economy is undergoing a "high-quality growth" driven by innovation. For global investors, understanding the macroeconomic signals reflected in these micro indicators is far more meaningful than blindly guessing price points. In the global asset allocation landscape, US stocks continue to prove their irreplaceable value in a solid and sustainable manner. Whether looking at historical performance of long-term compound growth or the expectations implied by current dynamic valuations, US stocks remain a core anchor providing stable returns for global investors.
