Stephanie Pomboy: Is The Worst Now Behind Us?

**Adam Taggart** (0:02)
And we should be live. Welcome, everyone. I am Thoughtful Money founder and your host, Adam Taggart, welcoming you here to another, what used to be Monday mornings, Monday morning macro with Stephanie Pomboy, which is now Wednesday morning macro with Stephanie Pomboy. Stephanie, nice to see you here on hump day.

**Stephanie Pomboy** (0:20)
Yeah, I was just gonna say happy hump day. I kind of like this better, you know, you get a little bit more momentum at this point of the week.

**Adam Taggart** (0:29)
Right. So anyways, lots to dig into, lots to discuss. Folks, hopefully, y'all got the memo and are joining us now and we'll be on our regular bi-weekly schedule from here, just on Wednesdays.

**Stephanie Pomboy** (0:41)
All right.

**Adam Taggart** (0:41)
So before these things go live, Stephanie and I, we exchange some texts and try to figure out what the theme of the week is gonna be. For this one, we sort of zeroed in on, you know, are the beatings over? You know, is the worst of this correction behind us? We've had a rough month in the markets. We have seen some initial bounce here. Of course, right after I created the thumbnail and title for this video, Stephanie, like, is there a rally on in the near term? Markets are down today. Of course, that's just Murphy's Law. Who knows where they'll close today? Maybe they'll close green. We'll see. But we got lots to talk about that. Obviously, I'd love to get your thoughts on the recent FOMC released and questions by Jerome Powell. Last time we talked a week and a half ago, you were quite concerned about recession risk. Just curious if the data we're getting in since then is corroborative of that or not. A number of other questions. We'll obviously get to some audience Q&A if we can. And we have a little bit of a shortened time today. We got to get you out of here 15 minutes for the end of the hour. So lots to cram into a short amount of time.
Let's start with the theme of this week, which is, are we through the woods here? I mean, at least in the near term.

**Stephanie Pomboy** (2:00)
Yeah. I mean, it's funny. You said the markets were up and I guess it depends on what market you're looking at because the doubt, I mean, the more down. S&P is down, Dow is up, NASDAQ is down. So it's kind of a mixed bag now. But in general, I think we had this 10 percent correction, then we've had a bounce off the bottom, and recovered about half of that at this point, a little less. And so I guess the inclination is to say, well, that was just we needed the correction and the opportunity to buy at better prices, as they would say. But I don't think anything has changed fundamentally. If anything, there seems to be even more uncertainty around policy coming out of the administration. You know, that's, I think, one of the major issues for the market. And it was reinforced this morning. The Richmond Fed, in conjunction with Duke University, does a quarterly survey of CFOs. And they came out and expressed a little more pessimism in the first quarter. And it was entirely around uncertainty relating to policy. And the tariffs were obviously kind of front and center in terms of their concerns. I think tax policy, probably secondary. They were obviously quite optimistic about the regulatory back or backdrop, but the tariff thing is kind of this looming unknown, both in terms of timing and expansiveness.
So it's hard for them to make decisions, understandably, in an environment where they're not really sure whether their supply chains are going to be disrupted by these tariffs or not. So that's kind of stifling a lot of what would be capex and hiring. And interestingly, and I think we talked about this when we chatted the last time, Adam, that at that point, the University of Michigan sentiment survey had come out and reflected incredible pessimism on the part of consumers about the labor outlook. And I remarked, I believe it was in our conversation that they tend to lead the actual data because they have a much better real time sense as to what's going on out there. So it was kind of reinforced with the CFO survey where they're kind of sitting on their hands a little bit in terms of both capex and hiring. So in that regard, it's hard to see where there's any basis for this sudden reversal in the stock prices other than, you know, you had a correction. And for those who were still bullish, it was an opportunity to buy it, like I said, better levels. But nothing fundamentally has changed here as I can tell. And we'll get an update on the Atlanta Fed's forecast for the first quarter sometime in the next, probably while we're having this conversation. But they're at roughly minus 2 percent for the first quarter, and their consumer spending component, importantly, is almost zero. If it actually prints at that level, it'll be the weakest first quarter since COVID, and the great recession before that. So that's clearly a recession signal right there. So anyway, let's just say I'm not convinced that the worst is behind us for the markets. And another thing that I've been really focused on for years now, as you know, is corporate credit. And the situation there just continues to devolve, and we're finally starting to see that reflected in asset prices with junk yields, and even investment-grade yields moving higher, and spreads widening dramatically because you've had this sort of rally in treasuries, and nominal rates in both investment-grade and high yield have moved higher in the face of it. So you've had a pretty significant winding of spreads, which is new and different. We hadn't seen that prior. So I think there are signs that this reversal in the markets, in the stock market is really just kind of unbridled enthusiasm with very little basis in reality.