Stephanie Pomboy: Signs Of Stagflation Are Multiplying

**Adam Taggart** (0:01)
All right, and we should be live here. Welcome to Thoughtful Money, folks. I'm Thoughtful Money founder and your host, Adam Taggart. Again, I'm not so much the host this time because we are joined, as usual, by the wonderful Stephanie Pomboy, and this is the resumption of our Monday Morning Macro with the Macro Maven herself. Stephanie, Stephanie, how are you?

**Stephanie Pomboy** (0:21)
I'm great. Thank you so much for setting this up. Again, it's good to be back. Yeah, I had a little unexpected family business that needed to be addressed. But everything's good, everyone's fine, and we're back in the saddle. So thanks for your patience.

**Adam Taggart** (0:41)
Very glad to hear about that. We had a lot of people who went into pretty severe withdrawal without their regular dose of Stephanie Pomboy. So folks, you'll get that dose today in spades. And it's good, Stephanie, because really nothing happened in the two weeks that you were gone.

**Stephanie Pomboy** (0:57)
You know, I mean, I feel like Rip Van Winkle. You know, I wake up and it's pretty much just the same. Everything has been on autopilot.

**Adam Taggart** (1:06)
So, yeah, well, yeah, to the contrary, it's been an incredibly eventful and volatile. Actually, I guess it's been four weeks since we've had you on the show. So lots and lots to talk about. You did send over some charts and whatnot that I can just pull up at will whenever you want to talk about them, Stephanie. But it looked to me like an important theme from the day that you sent over was that we are seeing signs of stagflation around here, or at least slowing economic growth. And do you want to start there or is there something burning even more brightly on your radar?

**Stephanie Pomboy** (1:46)
Yeah, no, no, no. I mean, I think that the one thing that really got everyone's attention last week was the sharp downward revision in the Atlanta Fed's GDP estimate, which was on Wednesday of last week, two and a half percent. And on Friday, it fell to minus 1.5. So that's a fairly sharp revision. I went back and looked, because I'm a nerd, at whether we've ever had a one-day swing in the forecast of that magnitude. And we have, not surprisingly, during the whole COVID whiplash experience where growth was forecast to be down 35 percent and then was up 10 percent and all over the place. The only other time we've seen any numbers this traumatic were also in the first quarter, which tends to be extremely volatile. For reasons that should be obvious because you come off of a really holiday inflated end of the year, and it tends to wreck havoc with the numbers because the statisticians can't keep up with the seasonal swings. So anyway, but obviously the Atlanta Fed number was just a reflection of this barrage of much weaker economic data that we've seen over the last several weeks. And as you alluded to in the outset there, Adam, that weaker data has come along to side signs that inflation is re-accelerating. And I know you and I had talked about this in prior Monday Macro conversations where we have this sort of stagflationary backdrop where the economy is clearly decelerating, but prices are sticky and people are really, it's putting a lot of stress both on consumers and businesses. And, you know, as relates to the latter, this potential increase in tariffs that we're going to see in the next few days, obviously only compounds the problem. So we'll see how all that plays out. But I think, you know, my broad takeaway is that we have this situation where the economy is clearly under stress and inflation is sticky, which is probably going to limit the Fed's capacity to rush in with the fire hoses, which would be their natural tendency. And that should be a real headwind for the markets. So up until last Friday, it looked like that was, in fact, starting to be the framework that investors were starting to say, look, you know, clearly things are decelerating, but the Fed's hands are somewhat tied. So we might not get the reaction function that we're used to. And that's bad news until, of course, Friday when all sins were forgiven. So we'll see what this week holds. Obviously, we got another barrage of data to digest this week, punctuated with the payroll number on Friday. So I suspect that we'll be due for a little more volatility this week and maybe a little less volume as people wait to see what that Friday number gives us.
That's sort of a broad rant, and I guess...