Stocks may crash 30% and the US economy could suffer a 2008-style collapse as the 'everything bubble' bursts, expert says
Prepare for stocks to crash and the American economy to suffer a sweeping downturn that rivals the Great Recession, Stephanie Pomboy has warned.
"The everything bubble has now burst, and that's going to hit everything, everywhere all at once," the Macro Mavens founder told Fox Business on Wednesday. "There's a lot of ugly stuff coming down the pike."
The stock market could plunge 30%, and the current pressure on banks could spread to commercial real estate, corporate credit, municipal bonds, and other markets, Pomboy said.
The economist noted that debt levels are higher today than before the mid-2000s housing crash, and the Federal Reserve has dramatically raised interest rates over the past year. The upshot is that consumers are struggling to afford their car loans and credit cards, and many companies and real estate developers are feeling the squeeze, she continued.
"This is really like 2007, 2008 all over again," Pomboy said. "Except I think it's going to devolve even faster than it did then because of the speed and magnitude of the Fed's rate hikes."
Pomboy, who worked at ISI for over a decade before starting her own investment-research firm in 2002, castigated the US central bank. She accused it of repeatedly pumping too much money into the economy, boosting asset prices to unsustainable highs, then ratcheting up interest rates and causing painful crashes.
"The Fed basically has us ping-ponging from asset bubble to bust," she said. "It's lather, rinse, repeat."
Fed Chair Jerome Powell and his colleagues hiked rates by another 25 basis points on Wednesday. Since last March, they've raised them from virtually zero to upward of 4.75% — the highest level since 2007.
If asset prices tumble and the economy weakens, the Fed could reverse course and rapidly cut rates in the months ahead, Pomboy said.
Pomboy is one of several experts sounding the alarm on stocks and the economy. Jeremy Grantham, a market historian and veteran investor, expects the S&P 500 to plummet 50% and a painful recession to take hold.