Markets may be celebrating a temporary U.S.-China trade truce, but macro strategist Stephanie Pomboy warns the party won’t last.
In an interview with Kitco News, Pomboy, founder of MacroMavens, cast doubt on the sustainability of the current market rally, citing structural imbalances across debt, credit, and consumption.
“This is just a 90-day ceasefire,” Pomboy said about the tariff reprieve. “To listen to the financial media, you’d think it was the final agreement – and it ain’t.”
While the Dow surged over 1,000 points on the news, Pomboy noted the more telling signal is the 10-year Treasury yield, which jumped to 4.49%. “That’s my number one macro indicator,” she told Kitco News. “Long rates have been stubbornly high – and that’s an issue for an economy as levered as ours.”
Pomboy noted a looming corporate debt wall, with over $1 trillion in bonds set to roll over in 2025. “Corporate debt service has doubled since the Fed started tightening in 2022,” she said. “There’s 1.2 trillion due next year, and another trillion after that.”
Meanwhile, foreign demand for U.S. Treasuries is waning. “If China has no reason to buy our debt anymore, we’ve got to come up with another buyer – fast,” she said. “I always come back to the Fed as the only obvious candidate to absorb all this issuance.”
On the Federal Reserve, Pomboy said political considerations are now driving monetary policy. “Powell doesn’t want to be seen as caving to the administration,” she said. “That sets a very high bar for him to cut rates, regardless of what the data says.”
The data, she argues, is already flashing red. “We’re seeing the worst credit card delinquencies on record … bankruptcies rising … and even McDonald’s just reported its weakest sales since COVID lockdowns,” she said.
Despite rising credit stress and signs of a weakening consumer, equity valuations remain historically stretched, according to Pomboy. “The market could get cut in half and still be overvalued,” she said. “I’m not touching stocks at these levels.”
But she is buying gold. “I bought more gold today,” she said, citing what she believes is the beginning of a broader reset in global trade and financing dynamics. “If we’re going to reset trade, we have to reset how we finance our deficits. That hasn’t been addressed yet, and that’s bullish for gold.”
Still, Pomboy expressed optimism about the longer-term outlook if the U.S. truly retools its economic foundation. “If we get through this painful transition and rebuild a real, production-based economy, the opportunity to buy great companies at cheap valuations will be phenomenal,” she said.
But first, she warns, markets will have to reckon with reality.
Can the U.S. survive without foreign buyers for its debt? Watch the full video!
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