"Big Short" predicts the US will face a "major recession" next year

Economist David Rosenberg warns that the two main engines supporting the U.S. economy are simultaneously faltering, and a severe recession could arrive by 2027.

On March 10, according to Business Insider, well-known Wall Street bear and Rosenberg Research president David Rosenberg recently stated that as fiscal stimulus effects fade and AI-related capital expenditures peak, the U.S. economy may fall into a “very serious recession” by 2027.

He pointed out that after Americans receive tax refunds this year, the economy may have a “lifeline” of two to three months, but will face more severe tests afterward.

Rosenberg also warned that if the stock market experiences a significant correction and the wealth effect diminishes, consumer spending will further shrink, enough to trigger a recession. Meanwhile, market turbulence caused by the Iran conflict has prompted Wall Street to re-evaluate recession risks and stagflation expectations.

Two main pillars weakening simultaneously

Rosenberg believes that the reason the U.S. economy has been able to resist recession pressures in recent years mainly relies on two forces: large-scale fiscal stimulus and a boom in AI investment.

On the fiscal side, the “big, beautiful bill” signed by Trump extended the 2017 tax cuts and introduced a series of stimulus measures. According to the Tax Foundation, this bill could boost GDP growth by 1.2 percentage points in the long run.

However, Rosenberg believes this benefit will face risks after the November midterm elections—he expects the Democrats may regain control of Congress, leading to legislative gridlock, and fiscal stimulus in 2027 may be “unrealized.”

On AI investment, Rosenberg pointed out that the capital expenditure boom among tech giants is expected to peak at some point in 2026.

According to Business Insider’s analysis of corporate announcements, Amazon, Google, Meta, and Microsoft together are expected to spend nearly $600 billion on AI-related capital expenditures this year. Rosenberg estimates that if we consider the wealth effect from rising tech stocks, AI capital spending has contributed about 90% to recent economic growth.

“Next year, we’ll be removing two crutches at once—enjoy the boom in capital expenditure while it lasts.”

Cracks in the economic fundamentals

As these two main supports weaken, the resilience of the U.S. economy itself is also diminishing.

Data from the Bureau of Economic Analysis shows that in the fourth quarter, real GDP grew at an annualized rate of only 1.4%, a sharp slowdown from 4.4% in the previous quarter. The labor market is also under pressure, with hiring cooling significantly over the past year and layoffs increasing.

Consumer-side pressures are also significant. The personal savings rate, a key indicator of consumer financial health, fell to 3.6% at the end of last year, down 150 basis points from early 2025.

“Without job growth, there’s no income growth,” Rosenberg said. “Imagine if people are forced to tighten their belts and cut back on spending based on actual income—what would happen?”

Stock market correction could trigger recession

Rosenberg specifically highlighted the critical role of stock market risk in this recession scenario.

He stated that if the stock market experiences a substantial correction, the wealth effect will weaken, further suppressing consumer spending, creating a self-reinforcing downward cycle in the economy, ultimately enough to trigger a recession.

“Corporate spending will face a vacuum,” he said, “and we could see a very serious recession in 2027.”

This warning is not isolated. Market turbulence caused by the Iran conflict has already prompted some on Wall Street to reconsider recession warnings and stagflation risks.

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