China Galaxy Macro says May nonfarm payrolls beat expectations but do not imply
the Fed will raise rates this year. May labor-market data remain overall
stronger than expected, leaving the Fed without near-term evidence to justify a
rate cut; at the same time the labor-market structure shows no clear
acceleration that would trigger an inflationary spiral, so markets need not
overprice an intra-year hike. Stronger nonfarm prints since March raise the bar
for cuts but, in China Galaxy Macro’s view, do not create upward pressure to
hike. The group considers markets have likely overestimated hike risk, though
lagging economic releases cannot disprove that risk and the Fed remains
data-dependent. After extreme AI-driven positioning, markets face a correction
risk; liquidity normalization is expected to resume this year but timing is
uncertain.
