Edwards told Fortune in an interview that previous theories about a bubble were \u201cvery convincing in 1999 and early 2000, they were very convincing in 2006-2007.\u201d Each time, he said, the \u201csurge in the market was so relentless\u201d that he just stopped talking about bubbles, \u201cbecause clients get pissed off with you repeating the same thing over and over again and being wrong,\u201d only to change their tune after the bubble bursts. \u201cGenerally, when you\u2019re gripped by a bubble, people just don\u2019t want to listen because they\u2019re making so much money.\u201d<\/p>\n
As he himself frequently points out, Edwards is known as a very bearish market strategist who has made some high-profile and dramatic predictions, often warning about major stock market crashes and recessions. His track record includes famously calling the dot-com bubble<\/a>, but it also includes warnings that haven\u2019t panned out, such as predicting a potential 75% drop in the S&P 500<\/a> from peaks\u2014worse than the 2008 financial crisis lows. When The New York Times<\/a> profiled Edwards in 2010, they noted that the chuckling, birkenstocks-wearing analyst had been predicting a Japan-style stagnation for U.S. equity markets since 1997 (a prediction he repeated in his interview with Fortune).<\/p>\n Still, Edwards insists that the current parallels to the late 1990s NASDAQ<\/a> bubble are clear: extremely rich valuations in tech, with some U.S. companies trading at over 30x forward earnings, justified by compelling growth narratives. Just as the TMT (Technology, Media, Telecom) sector attracted vast, sometimes wasted, capital investment in the 1990s, Edwards argued that today\u2019s enthusiasm echoes that earlier era. There are two key differences that could lead to a much worse outcome this time, though.<\/p>\n The Missing Trigger and the Meltup Risk<\/p>\n In previous cycles, Edwards explained, the catalyst for a bubble\u2019s demise was usually the monetary authority\u2019s tightening cycle\u2014the Federal Reserve hiking rates and exposing market froth. This time, with the Fed lowering rates, that trigger is conspicuously absent. Bank of America Research<\/a> has noted the rarity of central banks cutting rates amid rising inflation, which has occurred just 16% of the time since 1973. Ominously, BofA released a note on the \u201cGhosts of 2007\u201d in August.<\/p>\n Instead of tightening, Edwards anticipates the Fed will move away from quantitative tightening and likely shift to quantitative easing \u201cquite soon,\u201d due to issues in the U.S. repo markets, another ghost from the Great Recession. The Fed itself issued a staff report in 2021<\/a> on repo issues, writing in 2021 that trading between 2007 and 2009 \u201chighlighted important vulnerabilities of the US repo market.\u201d Repo issues reemerged in the pandemic, with the Richmond Fed<\/a> noting that interest rates \u201cspiked dramatically higher\u201d starting in 2019.<\/p>\n Edwards told Bloomberg that the absence of hawkish policy could lead to a \u201cfurther meltup,\u201d making the eventual burst even more damaging. Poking fun at himself, Edwards said, \u201cI just got bored being bearish, basically rattling my chains saying, \u2018This is all a bubble, it\u2019s all going to collapse.’\u201d He said that he can see how the bubble can actually keep going for much longer than a perma bear like himself would find logical, \u201cand actually that\u2019s when something just comes out the woodwork and takes the legs from out from under the bubble.\u201d<\/p>\n \u201cWhat\u2019s more worrying about the AI bubble,\u201d Edwards told Fortune, \u201cis how much more dependent the economy is on this theme, not just for the business investments, which is driving growth,\u201d but also the fact that consumption growth is being dominated far more than normal by the top quintile. In other words, the richest Americans who are heavily invested in equities, are driving more of the economy than during previous bubbles, accounting for a much larger proportion of consumption. \u201cSo the economy, if you like, is more vulnerable than it was in the \u201987 crash,\u201d Edwards explained, with a 25% or greater correction in stocks meaning that consumer spending will surely suffer\u2014let alone a 50% lurch.<\/p>\n Edwards told Bloomberg he was concerned about the widespread participation of retail investors who have been dragged into the market, encouraged to \u201cjust buy the dips.\u201d This belief that \u201cthe stock market never goes down\u201d is dangerous, Edwards warned, arguing that a 30% or even a 50% decline is very possible. The inequality of American society and the heavy concentration among high earners whose wealth has been \u201cinflated by the stock market\u201d is a major concern for Edwards, who pointed out that if there is a major stock-market correction, then U.S. consumption will be \u201chit very, very badly indeed\u201d and the entire economy will suffer. This view is increasingly shared by less uber-bearish voices on Wall Street, such as Morgan Stanley Wealth Management\u2019s Lisa Shalett<\/a>.<\/p>\n In many ways, Edwards told Fortune, we\u2019re overdue for a correction, noting that apart from two months during the pandemic, there hasn\u2019t been a recession since 2008. \u201cThat\u2019s a bloody long time, and the business cycle eventually always goes into recession.\u201d He said it\u2019s been so long that his perma-bear instincts are confused. \u201cThe fact I\u2019m less worried about an imminent collapse [right now] makes me worried,\u201d Edwards added with a laugh.<\/p>\n Edwards told Fortune that he\u2019s been through various cycles and bubbles and he gained his perma-bear status in the mid-1990s, when he felt a distant earthquake happening in Asia. \u201cYou\u2019ve been around the block a few times, you just do become cynical,\u201d he said, before correcting himself: \u201cThat\u2019s not the right word. You become extremely skeptical of the full narrative.\u201d He proudly repeats the story about how, when he was at Dresdner Kleinwort in the \u201990s, he wrote with skepticism about Malaysia\u2019s economic boom at the time, only to be surprised when Thailand blew up first. Nevertheless, he said, \u201cwe lost all our banking licenses [in Malaysia] because of what I wrote,\u201d adding that the story is still proudly pinned to his X.com account<\/a>. <\/p>\n \u201cI had to sort of basically hide under my desk,\u201d Edwards said of the inward reception to the emergence of his inner bear. \u201cCorporate finance banking departments certainly didn\u2019t appreciate losing all their banking licenses. But in retrospect, you know, they avoided a final year of lending to Malaysia before it blew up. They didn\u2019t thank me afterwards.\u201d<\/p>\n Fiscal Incontinence and Cockroaches<\/p>\n Beyond<\/a> equity valuations, Edwards has been highlighting two other major underlying risks point to systemic vulnerability. First, Edwards highlighted the long-term risk of inflation in the West, driven by \u201cfiscal incontinence.\u201d Despite short-term cyclical deflationary pressure emanating from China\u2014which has seen 12 successive quarters of year-on-year declines in its GDP deflator\u2014Edwards said he believes the path of least resistance for highly indebted Western politicians will be \u201cmoney printing.\u201d At some point, the mathematics for fiscal sustainability \u201cjust do not add up,\u201d forcing central banks to intervene through \u201cyield curve control\u201d or quantitative easing to hold down bond yields.<\/p>\n This is where Edwards\u2019 long-held thesis about Japan comes in, what he calls \u201cThe Ice Age<\/a>.\u201d Around 1996, he said, he started thinking that \u201cwhat\u2019s happening in Japan will come to Europe and the U.S. with a lag.\u201d He explained that the bursting of the Japanese stock bubble led to all kinds of nasty things: real interest rates collapsing, inflation going to zero, bond yields going to zero. Ultimately, it was a period of low growth that Japan still has not been able to break out of. The difference with the U.S., he added, is that Japanification actually started happening in 2000 with the dot-com bubble bursting, but \u201cthe relationship broke\u201d between the economy and asset prices as the Fed began \u201cthrowing money\u201d at the problem through QE. The U.S. has essentially been in a 25-year bubble since then that is due to burst any day now, he argued\u2014it\u2019s been due any day for a quarter-century.<\/p>\n \u201cWe\u2019re going to end up with runaway inflation at some point,\u201d Edwards told Fortune, \u201cbecause, I mean, that\u2019s the end game, right? There\u2019s no appetite to cut back the deficits. We bring back the QE, if and when this bubble bursts, the only solution is more QE, and then we end up with inflation, maybe even worse than 2022.\u201d<\/p>\n Edwards also sees a smoking gun in home prices. \u201cYou look at the U.S. housing market, you think, \u2018Well, actually, is the Fed just too loose relative to everywhere else?\u2019 Because why should other housing bubbles have deflated in terms of house price earnings ratio, but the U.S. is still stuck up there at maximum valuation or close to it?\u201d In a flourish that shows why Edwards is so respected despite his broken-record reputation, he notes that in a Bloomberg Opinion piece from 2018<\/a>, legendary former Fed chair Paul Volcker<\/a> \u201ceviscerated the Fed just before he died.\u201d The central banker who famously slew inflation in the 1980s<\/a> argued that the modern era\u2019s loose monetary policy was \u201ca grave error of judgment \u2026 basically just kicking the can down the road.\u201d Edwards shared an OECD chart with Fortune to show just how much U.S. housing has decoupled from global markets because the Fed has been too loose.<\/p>\n The analyst also said he applied his skepticism to private equity, an asset class that he sees having benefited immensely from years of falling bond yields and leverage. Private equity\u2019s advantage has been its tax treatment and the fact that \u201cit doesn\u2019t have to mark itself to market, so it isn\u2019t very volatile.\u201d However, the sector is highly leveraged, and if the global environment shifts to a secular bear market for bonds, he said that would be a \u201cmajor problem.\u201d Recent high-profile bankruptcies have started to leak into bond markets, prompting concern of \u201ccredit cockroaches<\/a>,\u201d as JPMorgan CEO Jamie Dimon recently labeled the issue. <\/p>\n Drawing on the metaphor that \u201cyou never have just one cockroach,\u201d Edwards warned that these bankruptcies signal deeper issues in a highly leveraged sector that has spread its \u201ctentacles\u2026 deeply into the real economy.\u201d<\/p>\n Fortune notes to Edwards that more mainstream, less bearish voices are sounding similar warnings, Mohamed El-Erian<\/a> at the Yahoo<\/a> Finance Invest conference and Jeffrey Gundlach<\/a>, the \u201cbond king,\u201d who takes a similarly skeptical view of private equity. Edwards agreed that something is in the air. \u201cI would say there are more voices of skepticism. And again, this is one thing which makes me worry. This bubble can go on. If it is a bubble can go on quite a long while. Well, we can kick the can down the road many times. Normally, the skeptics are swept aside.\u201d <\/p>\n For investors trapped between the fear of a collapse and the fear of missing a meltup, Edwards told advised investors to take him with a grain of salt but be mindful of potential warning sings. \u201cI say that I predict a recession every year, don\u2019t listen to me, but these are the things you should be looking out for.\u201d Paraphrasing an infamous quote from former Citi CEO Chuck Prince<\/a> that summed up the bubble mentality with a metaphor about a dance party, Edwards recommended: \u201cIn terms of dancing while the music\u2019s still playing, you have to decide whether to be in front of the band, pogoing, or dancing close to the fire escape, ready to get out first.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Albert Edwards, the outspoken Global Strategist at Soci\u00e9t\u00e9 G\u00e9n\u00e9rale\u2014a figure who even refers to himself as a \u201cperma…\n","protected":false},"author":2,"featured_media":309278,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[45],"tags":[182,181,507,32048,2800,112,74],"class_list":["post-309277","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-artificialintelligence","tag-bubble","tag-federal-reserve","tag-markets","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/309277","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=309277"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/309277\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/309278"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=309277"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=309277"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=309277"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/11\/image001.png\"\/)
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