Stephanie Pomboy: The Higher Yields Go, The Higher The Odds The Market Cracks

Adam Taggart (0:01)

And we should be live. Welcome to Thoughtful Money. I'm Thoughtful Money founder and your host, Adam Taggart. Welcome you here for our monthly live stream with the Macro Maven herself, Stephanie Pomboy. Hi, Steph, how you doing?

Stephanie Pomboy (0:13)

I'm great, good to see you. I feel like our monthly live stream got a little belated this month, thanks to me, as usual with my various technological issues.

Adam Taggart (0:24)

Well, I was gonna say, first off, you look great, especially given all that you've had to deal with in the past month or two. It's not really been a technical issue so much, it's been more the real world ones, like your knee and...

Stephanie Pomboy (0:38)

Yeah, well.

Adam Taggart (0:38)

Yeah, so anyways, given all that you've done, been going through, hey, thank you for making the time to do this. And like I said, you look none worse to wear for it all.

Stephanie Pomboy (0:47)

Well, thank you. Well, I'm borrowing this studio here. So it looks very glossy and professional, but yeah, I will embrace the illusion of a glossy and professional right now.

Adam Taggart (1:01)

All right. Well, look, real quick, before we get into the meat of today's discussion, we are talking here, what, about 10 days before Thoughtful Money's fall online conference, at which you will be participating on the faculty and you will be joining forces with your other partner in crime, Grant Williams. Yeah. You guys record when you have the ability, your super terrific happy hour. For Grant's followers, for us, for the conference, you'll be filming a super terrific happy half hour.

You and Grant will be giving all your best macro market outlooks there. Folks, if you have not yet signed up for the conference, I highly recommend you run, not walk, to thoughtfulmoney.com/conference and buy your ticket. Because despite my best efforts, if you haven't signed up yet, you missed the early bird price discount that we offered, which was the lowest one. But before the price rises to full ticket price, we're offering at the last chance to save price. I want to make sure everybody gets the lowest price they can. So go lock in your ticket right now at the last chance to save price. You've got about a couple of days to do that. And a quick reminder to you, if you are a subscriber to Thoughtful Money's newsletter, you have been sent a code that will give you $50 off of that price. All right, Steph, so with that said, let's see, a lot going on here. I know you got a lot to say about the Fed and about rising bond yields.

Let's, though, if we can, let's start with the consumer side. We're being told, hey, the consumer is still hanging in there, surprisingly. We look at retail sales and all that stuff, they're hanging in. Obviously, a big part of that may be due to the K-shaped economy where it's an average number, meaning there's a small number of people doing really well, pulling that up, not everyone else is doing so great. But there were two things I think you wanted to talk about. One is there's some interesting data that's come out from JPMorgan that has a lot of echoes of the consumer situation right prior to the global financial crisis. And secondly, I think I heard you say before we turn the camera on, you think the Republicans may be making the same mistake now that the Democrats made leading up to the last election. So let's start wherever you want to on those two issues.

Stephanie Pomboy (3:25)

Yeah. Well, I'll start with the last one first because it's a quick throwaway line, and that is this idea that the affordability crisis is just kind of a figment of the average consumer's imagination. And I understand the administration is incredibly frustrated because they've made huge strides in reducing the level of inflation, but prices continue to move higher. So it's again, this distinction between prices and the rate of increase, which is inflation. And I think the danger that the administration and the Republican mouthpieces are making is that they're basically saying, look, inflation came down from 92 to 34, and you're not appreciating how tremendous this is. And they're not appreciating it because the price of everything that they buy just keeps going higher and higher at a slightly slower pace. So if things were unaffordable in 2022, they're even more unaffordable today. Plus, on top of it all, you have interest rates that are now the highest since, you know, in 20 years. So that is a compounding factor for the average consumer.

And I think that's a danger that they're being a little bit too nonchalant about the concerns that the consumer is voicing. And you also see this in the financial sphere, where it's not just the administration that's kind of purporting it. It's even more profound in the sort of financial media community and the great pundits, you know, that they trot out there, who routinely describe the consumer as strong and talk about, you know, how solid everything looks. In reality, you know, there are two things, I think I've said this to you in the past. When I analyze consumer spending, I look at two things. What are they buying? What are they spending their money on? And two, how are they funding that expenditure? And it tells you a much more different story. You know, you could say consumer spending is up 4% year on year, and that's a solid number. But if you go through and you discover that all of the spending is on transportation and home insurance, and that they're funding those expenditures by drawing down, saving and running up credit card debt, it's a very different picture from, you know, look at the 4% spending headline and say, look how strong the consumer is, which is what's happening right now. And that kind of weaves into that JPMorgan survey, which I thought was fascinating.