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CNBC PRO Talks

Economist Pomboy says stocks are in a bubble, buy gold and bonds

Economist Stephanie Pomboy said she believes the stock market is in a bubble because economic growth will not live up to expectations and because any federal stimulus from President Donald Trump, if it even comes to be, will be mostly canceled out by tax increases and spending cuts on the state and local level.

"I think the stock market fits that definition" of a bubble, Pomboy told CNBC's Mike Santoli in an interview. "As an economist I look at stock market valuation by taking total stock market cap relative to GDP and we're right back where we were in 2000 at the peak ... I struggle with the idea that the stock market has a lot of upside room barring some spontaneous acceleration in growth, which sort of strikes me as unlikely."

Pomboy is founder of MacroMavens, a macroeconomic research firm which gave early warnings on the housing crisis. Before founding MacroMavens in 2002, Pomboy worked with Ed Hyman at ISI Group.

Investors should buy gold and Treasurys in order to ride out the coming pullback, Pomboy said.

"I just buy gold. It's kind of the easy way out on trying to figure out which currency is going to win the ugly contest," she said.

In this exclusive interview for CNBC PRO, Pomboy also comments on:

  • Why we won't get the economic boost as expected from Trump's plans.
  • A massive issue plaguing the retail industry.
  • Why bank stocks are particularly vulnerable here.
  • Why the U.S. dollar has "nothing, but downside."