Is a Major Crash Coming? Legendary U.S. Forecaster Warns of Potential 30% Stock Market Plunge

Wall Street veteran Gary Shilling is sounding the alarm, warning that a U.S. recession appears virtually unavoidable this year, potentially triggering a steep decline in the stock market. In a stark outlook, Shilling, a former Merrill Lynch executive, predicts the S&P 500 could plummet by up to 30%, signaling the arrival of a bear market before the year concludes.

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This year, the United States falling into recession is almost unavoidable, and the stock market is expected to have a large correction.

Shilling points to persistent vulnerabilities across various sectors of the U.S. economy as indicators of an impending downturn. He highlights the stagnation in the real estate market, largely due to expectations of sustained high interest rates. Furthermore, private sector capital expenditures have seen a significant drop in recent years, with the burgeoning AI sector's investment not enough to offset the overall decline. While consumer spending has been the bedrock of economic growth, Shilling notes a slowdown in actual disposable income growth and a decrease in the personal savings rate, suggesting consumers are under increasing pressure.

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The S&P 500 could eventually fall by as much as 30%, and a bear market could arrive before the end of this year.

From a Taiwanese perspective, as reported by Liberty Times, Shilling's bearish outlook serves as a cautionary tale for investors globally. While the article notes the AI boom, it emphasizes that broader economic indicators paint a worrying picture. Shilling's consistent pessimism over the past four years, even as markets have climbed, underscores the importance of not getting swept up in speculative frenzies. His analysis, focusing on fundamental economic metrics like income, savings, and capital expenditure, provides a grounded counterpoint to the often-euphoric narratives surrounding technological advancements, reminding us that underlying economic health remains paramount.

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The only measure that can currently prevent an economic recession is the introduction of a fiscal stimulus package, or continued strong demand from U.S. consumers, but he believes neither is likely to happen.