Societe Generale strategist Albert Edwards, known for his gloomy market outlooks and for predicting the dot-com bust, is raising fresh alarms about the current AI-driven stock boom. Edwards, who openly embraces his reputation as a "perma bear," believes the US equity market is in a bubble that could end even worse than the 2008 financial crisis, and that investors are ignoring the warning signs, per Fortune. Edwards, who has also issued some dire warnings that haven't come to pass, points to parallels with the late-1990s tech bubble. He says the current market features sky-high valuations justified by seductive growth stories.
Edwards says corporate earnings, like valuations, are overinflated, causing a "double bubble," per Benzinga, and warns that a sharp market correction could hammer consumer spending and trigger a broader economic downturn. This time around, he sees two big differences that could make the fallout much worse. First, the traditional trigger for popping bubbles—Federal Reserve interest rate hikes— is missing, as the Fed is now expected to loosen policy instead. Second, he says, the US economy is more exposed than ever to the fortunes of the wealthy, who are heavily invested in stocks.
Edwards also sees trouble brewing in private equity and the housing market, where he says loose monetary policy has kept valuations artificially high. And he warns that underlying problems like ballooning government debt and what he calls "fiscal incontinence" could eventually fuel runaway inflation. Edwards isn't alone in his concerns, with other Wall Street voices also sounding cautious. His advice to investors: Stay alert for warning signs, and be ready to move quickly if the bubble bursts. "It will end in tears, that much I'm sure of," he recently told Bloomberg.
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