According to Fortune, Albert Edwards—the Société Générale strategist who accurately called the dot-com bubble—is warning that today’s AI-driven market surge represents an even more dangerous bubble that could lead to a worse meltdown than 2008. Edwards, who describes himself as a “perma bear,” notes that current tech valuations are extremely rich with some U.S. companies trading at over 30x forward earnings, echoing the late 1990s NASDAQ bubble. He identifies two key differences that could make this collapse more severe: the Federal Reserve is cutting rates instead of tightening, and the economy is more dependent on stock-market-inflated wealth concentrated among the richest Americans. Edwards warns that a 30-50% stock market correction is very possible, which would devastate consumer spending since the top wealth quintile now drives a much larger proportion of consumption than in previous cycles.
Broken Record With a Track Record
Here’s the thing about Edwards—he’s been warning about bubbles for decades, and sometimes he’s been spectacularly right while other times spectacularly wrong. He nailed the dot-com collapse, but he’s also predicted a 75% S&P 500 crash that never materialized. The New York Times noted back in 2010 that he’d been forecasting Japan-style stagnation for U.S. markets since 1997. So why should anyone listen now? Because even broken clocks are right twice a day, and the current market mania feels different. Edwards admits he sometimes gets bored being bearish, “basically rattling my chains saying, ‘This is all a bubble, it’s all going to collapse.'” But his skepticism comes from watching multiple cycles where “people just don’t want to listen because they’re making so much money.”
Why This Bubble Could Be Worse
What really worries Edwards—and should worry the rest of us—are the unique vulnerabilities in this cycle. Normally, bubbles pop when the Fed tightens monetary policy. But this time? The Fed is cutting rates amid rising inflation, something that’s only happened 16% of the time since 1973 according to Bank of America Research. Edwards anticipates the Fed will actually shift to quantitative easing “quite soon” due to issues in repo markets—the same plumbing problems that emerged during the 2008 crisis and again in 2019. The Fed’s own research acknowledges repo market vulnerabilities dating back to 2007-2009. Without the typical hawkish policy brake, Edwards fears a “further meltup” that makes the eventual collapse even more devastating.
The Real Economic Danger
Look, the scariest part isn’t just that stocks might crash—it’s what happens to the real economy afterward. Edwards points out that consumption growth is now dominated far more than normal by the wealthiest Americans who are heavily invested in equities. So if stocks correct 25% or more? Consumer spending gets “hit very, very badly indeed.” We’re talking about an economy that’s “more vulnerable than it was in the ’87 crash.” Add in the retail investors who’ve been encouraged to “just buy the dips” with the dangerous belief that “the stock market never goes down,” and you’ve got a recipe for widespread financial pain. This view is increasingly shared by less bearish Wall Street voices like Morgan Stanley’s Lisa Shalett.
The Bigger Systemic Risks
Beyond the immediate AI bubble concerns, Edwards sees two major systemic threats looming. First, he warns about long-term inflation driven by “fiscal incontinence”—where highly indebted Western governments will inevitably turn to money printing. The mathematics for fiscal sustainability “just do not add up,” potentially forcing central banks into yield curve control. Second, he’s been warning about “Japanification” since 1996—the idea that the U.S. would follow Japan into a prolonged period of low growth and zero interest rates. He argues we’ve essentially been in a 25-year bubble since the dot-com crash, with the Fed constantly “throwing money” at problems through QE. The legendary former Fed chair Paul Volcker, who famously tamed the Great Inflation, apparently agreed, “eviscerating the Fed” in a 2018 opinion piece for their loose monetary policies. Edwards’s grim conclusion? “We’re going to end up with runaway inflation at some point… maybe even worse than 2022.”
