Economist Stephanie Pomboy has sounded a cautionary note, suggesting that the surge in US corporate bankruptcies represents a more significant economic risk than many market participants have recognized. She goes so far as to propose that this trend could foreshadow an event that surpasses the scale of the 2008-2009 financial crisis.
In a recent post on X, the founder and president of the boutique research firm Macro Mavens argued that while some economic commentators have been discussing the collapse of American companies, they have yet to grasp the full extent of the problem. The data supports Pomboy’s concerns, as S&P Global Market Intelligence reports that more US companies went bankrupt in the first half of the year than during any other six-month period since 2010. The primary culprit has been historically high interest rates, placing immense pressure on American businesses. Shockingly, this wave of bankruptcies even exceeded the levels seen in the same period of 2020, when the pandemic wreaked havoc on the economy.
Pomboy emphasized the gravity of the situation by pointing out that even though some have begun to echo her concerns about corporate bankruptcies, they have not fully connected the dots. She suggests that if they did, they would be advocating for a fiscal and monetary response that far surpasses the measures taken during the 2008-2009 financial crisis.
Well-known names such as Silicon Valley Bank, Bed Bath & Beyond, Lordstown Motors, and Mediamath Holdings have succumbed to bankruptcy in recent months, underscoring the breadth of this economic challenge. Pomboy has been consistently raising alarms about looming economic and market risks in 2023.
In a previous warning, she highlighted the disconnect between investors’ growing optimism about the Federal Reserve eventually cutting interest rates and their underestimation of the consequences of the central bank’s aggressive policy tightening since early 2022. According to Pomboy, markets appear to anticipate the Fed’s pivot but fail to anticipate the pain that will precede it. She predicts that the impact on the economy, corporate entities, and household credit situations will be so severe that it will necessitate a dramatic reduction in interest rates.
Stephanie Pomboy’s observations serve as a stark reminder of the challenges and uncertainties facing the US economy and financial markets. As the situation unfolds, market participants and policymakers will need to carefully assess the evolving risks and consider appropriate responses to ensure economic stability and recovery.
