Stephanie Pomboy: Signs Of Stagflation Are Multiplying
Mar 4, 2025
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Stephanie Pomboy, a macroeconomic expert, shares her sharp insights on the alarming signs of stagflation and persistent inflation in today’s economy. She highlights concerning GDP revisions and the drop in consumer spending, especially in the pet industry. Pomboy discusses the disconnect between a thriving stock market and poor consumer sentiment, cautioning against potential financial market corrections. With geopolitical dynamics shifting, she also explores gold's resurgence as a safe investment and the complexities of trading in these volatile times.
The podcast highlights the troubling signals of stagflation, marked by slow growth and persistent inflation, raising substantial economic concerns.
Consumer spending is under strain, with declining retail sales indicating potential recessionary pressures and deteriorating consumer confidence.
Despite economic challenges, commodities and energy stocks show resilience, suggesting a shift in investor focus towards hard assets for stability.
Deep dives
Economic Indicators Show Stagflation
Recent data indicates a troubling trend of stagflation, characterized by slow economic growth and rising inflation. The Atlanta Fed's GDP estimate dramatically shifted from a forecast of 2.5% down to -1.5% overnight, highlighting volatility in economic predictions. This downward revision is linked to a recent barrage of weaker economic data and signals that inflation is beginning to reaccelerate despite a slowing economy. This combination is raising concerns that the Federal Reserve may face limitations in implementing aggressive monetary policy to spur recovery.
Consumer Spending Under Pressure
Consumer spending, often a critical indicator of economic health, has shown significant signs of strain, suggesting the economy may already be in a recession. Retail sales, adjusted for inflation, have been declining for over two years, indicating a contraction in actual purchases by consumers. Pet spending, considered a non-discretionary expense, has also declined year-on-year for nearly two and a half years, further showing consumer distress. Increased credit card delinquencies and waning consumer confidence further underscore the bleak outlook for spending.
Impact of Tariffs on Economic Data
The potential imposition of new tariffs is expected to exacerbate economic challenges, contributing to the current weak GDP readings. Businesses appear to be front-running these tariffs by increasing imports, which is skewing trade data and impacting overall GDP calculations. However, this front-loading may not provide a long-term solution, as it tends to create inventory imbalances rather than genuine economic growth. The data suggests that the underlying health of the economy is weak, raising questions about the sustainability of these adjustments.
Uncertainty Prevails in Market Outlook
The current market environment is characterized by significant uncertainty, with investors concerned about an economic slowdown amid high valuations. Although there has been excitement surrounding potential policies from the current administration, there are fears that these may lead to unforeseen economic pain. The disconnect between a strong stock market and decaying consumer sentiment signals a volatile future, where market corrections seem likely. A cautious approach to investments is advisable, with an emphasis on preserving capital amid this uncertainty.
Shifts in Energy and Commodity Markets
Despite economic concerns, energy and commodity stocks have remained resilient, with suggestions of possible upside from a resolution of geopolitical tensions, particularly regarding oil prices. The ongoing economic slowdown has surprisingly failed to translate into a decline in oil prices, indicating underlying supply issues remain problematic. There is a belief that commodities may serve as a hedge in the current unstable economic climate, with investments in hard assets becoming increasingly attractive. This could lead to a significant shift in how investors approach commodities versus equities moving forward.
Our bi-weekly ‘Macro Monday Mornings’ with Stephanie Pomboy resumed today.We discussed the mounting signs of economic slowdown, as well as the continued ‘stickiness’ of inflation.Will the rest of 2025 see us stuck in Stagflation?Stephanie thinks the odds are uncomfortably high. And similarly so for a material correction in the financial markets.We also discussed her projected implications of the latest policy developments of the new Trump administration (as best we understand them given the highly-fluid environment). And Stephanie also fielded live viewer Q&A.BUY YOUR TICKET ATTHE EARLY BIRD PRICE FOR OUR MARCH 15 CONFERENCE at https://thoughtfulmoney.com/conference
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