Economist Warns: Major Market Crash Looms!

As the stock market reels from a turbulent week, a prominent U.S. economist is sounding the alarm, warning that the recent instability may just be the beginning of a more severe economic downturn. Stephanie Pomboy, President of Macromavens, cautioned on Thursday that the country could be facing a “reckoning” in both the economy and the financial markets.

“There’s a lot of pain ahead of us, both for the economy and this reckoning for the markets that have been really behind the curve, like the Fed,” Pomboy stated during an appearance on “Mornings with Maria.”

The concerns are driven by fears that inflation could outpace income growth, a scenario that Pomboy suggests could have dire consequences. “People view the likelihood that inflation will outstrip their income as higher today than they did when the unemployment rate was 10% at the depths of the global financial crisis,” she added. “So wait till the employment shoe drops.”

These remarks come on the heels of a global market sell-off earlier in the week, where the Dow Jones Industrial Average plummeted by 2.6%, the Nasdaq Composite fell by 3.43%, and the S&P 500 dropped by 3%. While Thursday’s jobless claims report provided some temporary relief, showing a decrease in initial claims, the broader economic outlook remains concerning.

According to data released by the Labor Department, initial claims for the week ending August 3 fell by 17,000 to 233,000, which was below the 240,000 estimate by Refinitiv economists. Despite this slight improvement, the figure remains above the pre-pandemic average of 218,000 claims recorded in 2019.

“Middle America has been in recession for a long time. And again, Wall Street has kind of ignored it. But I think that’s all starting to catch up now,” Pomboy commented, highlighting the disconnect between Wall Street and the economic realities faced by everyday Americans. The recent payroll report, she notes, has forced Wall Street to confront this reality.

As Pomboy explained, the upcoming economic data will be critical in determining the future direction of the markets. “Clearly, the employment data is going to be crucial. And then, of course, next week we get inflation measures as well as retail sales, which will be key as relates to the outlook for the consumer,” she said.

The situation is compounded by the rise in continuing jobless claims, which track the number of Americans who are consecutively receiving unemployment benefits. For the week ending July 27, continuing claims rose by 6,000 to 1.87 million, marking the highest level since November 2021.

In the midst of this uncertainty, investors seem to be at a loss for direction. Pomboy noted the confusion and uncertainty that currently grips the market. “Investors aren’t really sure what they want at this point in the market,” she observed.

Pomboy concluded with a grim outlook, indicating that the market’s recent behavior is a sign of what’s to come. “I think this is indicative of what we’re heading into, which is the data. It’s going to be the tail wagging the market dog, as it should be,” she warned. “I really think there’s clear evidence there’s consumers in recession, and Wall Street is just finally coming to grips with that.”

As the stock market faces ongoing volatility and economic indicators paint a mixed picture, the warnings from experts like Pomboy serve as a sobering reminder that the U.S. economy may be on the brink of a significant downturn. Investors and consumers alike will be closely watching the upcoming data releases, which could further clarify the trajectory of the economy in the weeks and months ahead.