Stephanie Pomboy: A "Spectacular Implosion" In Stocks Is Due Once The Euphoria Ends

As dramatically as prices have zoomed higher, they may correct as dramatically

As we prepare to enter a new year, there's a revived optimism on Wall Street.

Excited in part by the pro-business policies of the incoming Trump administration, stocks are back to trading at record highs and investor and business confidence is rising.

But that said, the average American household is still struggling under a high cost of living, and a labor market that does not seem as robust as we've been told.

How will this dichotomy resolve in 2025?

Will consumers eventually catch Wall Street's optimism?

Or may stock prices have to moderate their expectations for economic growth & corporate profits?

For an expert view, we're lucky today to talk with Stephanie Pomboy, economic and market analysis and proprietor of MacroMavens.com.

She’s concerned that a correction will be unavoidable after the current surge of investor euphoria becomes exhausted. A correction that could be just as dramatic as the run-up has been.

To hear her thoughts on portfolio positioning for such an outcome, click here or on the video below:

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Adam’s Notes: Stephanie Pomboy (recorded 12.9.24)

EXECUTIVE SUMMARY:

• A significant gap exists between the payroll and household surveys, with the former showing a 2.3 million job gain over the past year, while the latter indicates a 700,000 job loss. Historically, household surveys are more reliable at economic turning points, suggesting the economy may already be in a recession.

• Several metrics, including a 1 million drop in full-time employment, two years of declining real retail sales, rising credit card and auto loan delinquencies, and an increase in Chapter 11 corporate bankruptcy filings, point to a severe economic downturn. These indicators contrast sharply with GDP growth figures, which rely on questionable inflation adjustments.

• The looming "debt maturity wall" in 2025 involves $10 trillion in Treasury debt refinancing. This includes $6 trillion in short-term bills and $4 trillion in longer-term notes initially issued at lower yields (around 2%), now facing refinancing at rates between 4% and 5.25%. This higher refinancing cost risks crowding out private sector debt, which itself faces $700 billion to $1 trillion in obligations.

• Current market highs and tight credit spreads reflect a euphoric overvaluation fueled by expectations of pro-business policies from the Trump administration. A sharp market correction is likely as