A former BlackRock fund manager just issued a major warning on the US economy.
In a new interview on Market Disruptors, Edward Dowd forecasts an incoming recession and market meltdown driven in part by a housing crisis and a bursting AI bubble.
Dowd points to collapsing new home permits since 2022 and falling tenant rents as early signs of a housing crash.
He also warns that government spending cuts and a slowdown in illegal immigration will sap economic growth, with stock markets facing a potential 50% drop based on historical patterns.
“The idea here is you have a recession that we think manifests itself pretty soon, and the stock markets bottom sometime in the first quarter of 2026.
Then you have a recovery, that’s the ideal situation… We’re not claiming anything’s going to go systemic. We’re not doom and gloom. It’s just we think it’s an old-fashioned deep recession and hopefully it’s quick. Typically speaking in recessions like in the dot-com recession and the great financial crisis, stocks went down 50% before they recovered, so we’re nowhere near down 50% yet and we think that’s coming.”
The Dow Jones Industrial Average dropped from its all-time high of 45,073 in December of 2024 to a low of 38,314 last month, registering a 15% decline.
Dowd traces the crisis to a global debt problem, temporarily masked by COVID-era money printing and spending, with commercial real estate and rising auto loan delinquencies signaling a broader credit crunch.
In the long run, he expects deflationary pressures to force the Federal Reserve to slash rates and print money.
For protection, Dowd advocates holding cash, pointing to Berkshire Hathaway’s massive position in T-bills/bonds, as well as physical gold, while cautioning against Bitcoin’s volatility and historic correlation with risk assets.
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