US Federal Reserve

Less than a decade ago, the mere hint that the Fed was either propping up markets or actively pushing them higher was enough to get one branded a conspiracy theorist loon and never again invited to polite conversation. Since then first Bernanke, and then virtually all central bankers both domestic and foreign have admitted that the "wealth effect", a polite way of saying pushing up asset prices, has been their primary goal and function.

Now that all eyes have turned on China eager to find how it will react to a potential Fed rate hike in June or July, the question is whether the sharp Chinese devaluation unveiled overnight, which sent the Yuan to fresh 5 year lows, will be a one-off event, and whether the PBOC will intervene far more aggressively in the offshore CNY market to keep FX market turmoil to a minimum.

According to at least one person, the answer is no.

Submitted by Aaron Chan via Medium.com,

Last week, we discussed the precarious state of the overstretched U.S. consumer and the spill-over effects of poor performance on the part of major retailers and other consumer discretionaries. In a nutshell, consumer credit growth appears to have reached its cycle-high and retail sales growth is beginning to flatline:

Over the weekend, Deutsche Bank's chief credit strategist Dominic Konstam released a report in which as we documented, he explained his reasons why "the market is not ready for a June hike." This was his key point:

The operative question is whether markets are sufficiently calm for the Fed to use the June 2016 meeting to pave the way for a July hike.

 

In his latest contrarian comments to Reuters, Jeff Gundlach focused on the recent flipflopping by the Fed and its various speakers who are now positioning the market for an imminent rate hike despite the US economy still treading water, and said that while many Fed officials are "dying to raise rates," but all that matters is Janet Yellen's opinion, a glimpse of which we will get as soon as this Friday when she speaks at Harvard. "All that matters is Yellen. She is still there."