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Transitory hotter inflation and a stable, but not solid, US labor market: Will the Fed hike?

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  ·    Fine prints of the May US job report indicate a stable labor market, but not solid, as a 4.3% unemployment rate comes on the back of a -0.8% decline in LFP. ·        Despite a hotter May NFP job addition, the overall YTM average was around +114K, much lower than the +200K average standard for the US economy. ·        Real wage growth is now turning negative, while the overall economic situation may be indicating a stagflation/stagnation-like scenario. On June 5, 2026, market focus was on the US NFP/BLS job report for May '26 and the overall employment situation in the world’s biggest economy amid Trump’s chaotic policies on immigration and a trade/tariff war with Iran. The BLS Establishment Survey The latest BLS establishment survey flash data (seasonally adjusted) shows that the U.S. economy (private + public/government sector) added +172K non-farm payroll (NFP) jobs in May '26 after adding +179K sequenti...
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Stocks and gold slid on Fed rate hikes and Iran deadlock concerns.

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  ·        AI bubble panic is also accelerating rotational shifts from tech to real economy stocks; metals and defense stocks are under stress as the Iran war may be over. ·        The market is now assuming an 80% probability of a Fed rate hike of 25 bps in Dec '26 and a higher, longer monetary policy, contrary to earlier perceptions. ·        At around 305 projected EPS for CY27 and a 22-20 average fair PE (base case) against a 22-20% average CAGR, the average fair value of SPX-500 may be around 6700-6100 (against the recent high of 7600). ·        The Fed may be on hold in 2026 rather than hiking amid transitory, hotter inflation and a stable labor market. Wall Street was buoyed for the last few weeks on the Iran deal and AI optimism despite a fragile ceasefire, Trump’s constant back-and-forth stances, and growing concern over the AI bubble, especially after Br...
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