Stephanie Pomboy: The Next Fed Cut To Mark The Peak In Stocks?

**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 back here for another bi-weekly session with the macro maven herself, Stephanie Pomboy. Hi, Steph, how are you?

**Stephanie Pomboy** (0:13)
I'm great. How are you?

**Adam Taggart** (0:15)
Well, I got to tell you, I'm feeling an awful lot better than I was even 24 hours ago. Recent viewers of the channel know that I caught the flu, traveling internationally last week, and today is the first day that I feel like I've rejoined the world of the living.

**Stephanie Pomboy** (0:30)
Well, welcome back to the world of the living. I don't know, these days describing it as the world of the living, maybe a little generous, but pretty wild out there, but here we are.

**Adam Taggart** (0:44)
Well, I can understand too that you got to recharge your batteries a little bit over the past week and you're looking refreshed.

**Stephanie Pomboy** (0:50)
Well, thank you. I showered, especially for this occasion. Oh, my God.

**Adam Taggart** (0:56)
All right. Well, look, everybody, hope you're all having good summers as well as we kicked this off in the heat of August here. Let's see, there's a lot to talk about, Steph. If we can, at some point, I want to talk to you about tariffs. I've kicked over a little bit of a hornet's nest on ex Twitter about this, and I'd love to add your thinking to mine here. But before we do that, we got the latest inflation data this week, and relatively muted, right? We can look at a few elements to say, oh, they're a little bit higher than folks expected, but we're still talking about a CPI that's still got a two-handle on it and came in as expected. That seems to give the Fed more air cover to cut here. We also are seeing some increased weakness in the jobs market, continuing claims continue to march up.
The market's expectations for future Fed rate cuts this year, it's been ping-ponging around all year, but now it's game on again. I think the market's expecting three or four cuts in 2025 alone, and then of course, perhaps more in 2026 Let's start there. Do you share the market's opinion that we're about to enter an era of Fed cutting here?

**Stephanie Pomboy** (2:16)
Well, I think we're definitely going to get a cut or two by the end of the year. What happens thereafter remains to be seen, because as you said, directionally, the headline inflation numbers continue to move in the right direction, but the core is a little sticky. I guess there's this question in my view of the shift toward stockpiling of resources that I think will continue to keep upward pressure or at least holds high. Commodity prices in general and oil in particular, not withstanding all the efforts to deregulate and drill, baby drill and all of that. We're just living in a world where the demands on resources are so enormous at the same time that you have this geopolitical sort of cold war going on to stockpile those precious resources. So I think that is an element to the inflation picture that is not going to be moving in the Fed's direction. The question always comes down to who pays that? That increases costs of production to businesses. The question is how much of that are they able to pass on to consumers? As we've seen with the tariffs so far, contrary to the hysterical hair-on-fire headlines when Trump was talking about tariffs, and everyone glibly described it as a tax on the consumer, what we found is it hasn't been a tax on the consumer. It's been much heavier tax on the corporations and particularly on the global exporters because they've had to absorb some of that on the back end. So again, I keep coming back to this resistance on the part of consumers to absorb higher prices on things that they can afford to live without. So I think that in the aggregate, I'm not looking for CPI to move substantially higher. I think that it's just going to be stubborn. It may not move significantly lower. I think the PPI is the number to watch and we'll get that tomorrow.
Not that tomorrow's number will be particularly informative, but I mean over the longer term, I would expect the pressures to be more profound at the PPI level than at the CPI level to the detriment of corporate profit margins. But of course, that's the song that I've been singing for quite a while. And they keep reporting these robust earnings. I will say, however, and I've got this little chart printed out here. You can't see it. But the latest treasury receipts and outlays just came out. The monthly budget report came out yesterday. And year on year, corporate tax receipts are now negative. So at the same time, corporations are reporting resplendent growth in earnings year on year, or at least the S&P 500 companies are. Corporate America is remitting to treasury negative. And the remits to treasury are down year on year. So something isn't adding up there. And I don't know if that's related to the shenanigans.