MacroPass™: Stephanie Pomboy On The State Of The US Consumer
Spoiler alert: it ain’t great.
This installment of our popular MacroPass™ service for premium members of this Substack comes from great friend of Thoughtful Money and regular guest, Stephanie Pomboy.
It’s her latest analysis on the current state of the US consumer. Spoiler alert: it ain’t great.
Between credit quality that is already at recession levels (despite an economy that is still expanding), the impact of the resumption of student loan payments on other forms of credit, the possible deflation of the housing bubble and corporate credit downgrades coming at the fastest pace since Covid, there’s plenty of reason to doubt Fed Rate cuts will beget an increased appetite for banks to lend to increasingly strapped households.
As a reminder, MacroPass™ is a weekly rotating selection of premium analysis from many of the big thinkers interviewed on Thoughtful Money.
To-date that list of contributors includes experts like Lacy Hunt (Hoisington), Stephanie Pomboy (Macro Mavens), Danielle DiMartino Booth (QI Research), Tom McClellan, Michael Howell (Capital Wars), Darius Dale (42 Macro), Doomberg, Ted Oakley (Oxbow Advisors), Kevin Muir (The Macro Tourist), Alf Peccatiello (The Macro Compass), Lance Lambert (ResiClub), Ed Yardini (Yardini Research), David Hay (Haymaker), Melody Wright (M3_Melody), David Stockman (Contra Corner), David Brady (FIPEST Report), John Rubino, Adam Kobeissi (The Kobeissi Letter), Sven Henrich (Northman Trader), Jeff Clark (The Gold Advisor), Charles Hugh Smith, Steven Bavaria (Inside the Income Factory®), Chris Whalen (The Institutional Risk Analyst), Felix Zulauf, Jesse Felder (The Felder Report), Brent Johnson (Macro Alchemist), Pieter Slegers, (Compounding Quality), Michael Oliver (Momentum Structural Analysis) and Anna Wong (Bloomberg Economics).
Recent MacroPass™ reports in this series include:
Steven Bavaria on how to receive a year's worth of dividends in only 7 months
Pieter Slegers on 100 insights from the recent Berkshire Hathaway annual meeting
Brent Johnson on the power dynamics underlying the tariff war
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MacroMavens: The State Of The US Consumer
July 22, 2025
Well last week was revealing, wasn’t it? The million-dollar question for the market was asked and answered.
With his early morning threat to fire Powell, Trump basically invited the markets to weigh-in on whether more immediate rates cuts would be greeted with enthusiasm. The answer was a resounding ‘no’. The long-end of the yield curve sold off, driving stocks sharply lower. And the Dollar Index got tagged for another 22 basis points.
There’s just no way around it. At $37t, our federal debt has become the immovable rock against which the Fed and the administration are pressing. The administration more so than the Fed. But Powell & Co. will get there eventually. And, if last Wednesday was any indication, when they do, it will accomplish exactly nothing.
At the risk of finding support for my own thesis in the market action, what we saw last week just underscores to me the degree to which investors and the administration are completely missing it. The Fed Funds Rate is irrelevant. The balance sheet is all that matters. The only thing that can get long rates down, now, is renewed Fed purchases.
If that point weren’t obvious by the end of the day on Wednesday, it was underscored the next afternoon with the release of the TIC data for May. It showed foreign central banks continued to sell Treasuries in the month, dumping another -$23b (see addenda). According to the Fed’s more-timely Custody Account, they have sold another -$23b in the 6 weeks since. For those keeping score, that’s almost exactly equal to the tariff revenue collected in May. So that little ‘windfall’ has already blown out the window. This is the un-botox-able wrinkle with the whole trade rebalancing agenda. As bemoaned here for months now, by handing the rest of the world fewer dollars to recycle into our markets, rebalancing trade will only exacerbate our deficit financing problem. And count me skeptical that things like tweaking the SLR to allow banks to add still more to their underwater Treasury positions and/or establishing a Stablecoin reserve will provide sufficient offset. ☺ It’s sure tricky trying to roll $7t in debt when your two main sources of funding (the Fed and foreigners) are selling -$130b annually.
But I promised you an update on the consumer this week. And you shall have it…
