Wobbly crutches: why does a renowned economist see the risk of a US crisis in 2027?

The U.S. economy could face a serious collapse as early as 2027, David Rosenberg believes. The president of Rosenberg Research believes that the period of abnormal stability is coming to an end: the United States is close to losing the two main drivers of growth that kept the economy from falling: large-scale fiscal stimulus and billions of dollars of investments in the artificial intelligence sector.

According to the head of Rosenberg Research, the U.S. is close to the end of a multi-year period of stability, writes Business Insider. Rosenberg predicts that the decline of the U.S. economy will occur due to the depletion of internal reserves, which have supported the stability of the U.S. economy over the past few years. In his estimation, the period of abnormal growth will end as soon as businesses lose incentives to expand investment.

The current resilience of the U.S. economy relies on massive government injections and a technology race. Rosenberg warns that the potential of these drivers has already been exhausted, and the market is approaching a moment of forced transformation:

First of all, it is about the completion of the investment cycle in the AI sphere, which, according to the analyst's estimates, has provided about 90% of all economic growth in recent years. Four technology giants - Amazon, Google, Meta and Microsoft - will spend about $600 billion on capital investments this year alone. Rosenberg believes that after passing this peak in 2026, business spending will inevitably decline, depriving the market of its main fuel.

In parallel, fiscal stimulus will also be at risk. Donald Trump's massive tax cut One Big Beautiful Bill added 1.2 percentage points to GDP. But after the midterm elections in November 2026, Congress could find itself in a political stalemate: if Democrats take control of the House, legislative paralysis for the next two years would make it impossible to pass new support measures, leaving the economy in 2027 without the usual boost.

According to Rosenberg's forecast, the trigger for a full-scale recession will be a sharp correction in the stock market, which will finally destroy the so-called wealth effect. The economist is convinced that the rise in stocks has so far made people spend more, but the foundation of this consumption looks extremely fragile.

Rosenberg notes that hiring has slowed significantly over the past year, and the personal savings rate has fallen to 3.6%. Under such conditions, any market shake-up, he believes, will deprive people of the ability to use stock assets as a financial safety net.

Rosenberg believes that limiting spending to the level of actual revenues will make a massive economic downturn inevitable.

Rosenberg's warnings come against the backdrop of an already cooling economy: in the fourth quarter, real GDP growth amounted to 1.4% year-on-year against 4.4% in the previous quarter. According to the expert, the tax refunds that Americans will receive this year will create only a short-term illusion of stability. This "margin of safety" will be enough for only two or three months, after which the hidden problems of the labor market and lack of savings will manifest themselves in full measure.

Additional pressure comes from volatility over the conflict in Iran - the very backdrop that has Wall Street back to discussing the risks of stagflation and recession, Rosenberg says.

This article was AI-translated and verified by a human editor