I just posted a review of Andrew Ross Sorkin’s book 1929: Inside the Greatest Crash in Wall Street History — and How it Shattered a Nation over at Good Reports. I didn’t think it was very good, in large part because it didn’t address, directly or at any length, the causes of the crash and what lessons it might have for us in 2026. But on the plus side it did get me wondering.

While a stock market crash like 1929 might be unlikely today, I do think we’re in for rough weather. I went over some of the reasons for this in an earlier post about the collapse of the Canadian subprime lender goeasy, and my concerns have only grown. Two seemingly unstoppable forces are coming together in the U.S., the country that is still the world’s economic driver: (1) inflation brought on by Trump’s tariff regime, the closing of the Strait of Hormuz (which affects a lot more than oil, as if oil wasn’t enough), and the Fed’s easy money policy; and (2) the threat of higher interest rates — the raising of interest rates being the main tool in the toolkit of central banks for fighting inflation. The problem is that higher interest rates dampen economic growth, threaten a lot of bad loans (and there are a lot of bad loans out there, especially in the world of private credit), and make government borrowing vastly more expensive (at a time when the U.S. national debt is hanging around $39 trillion). And so the end of last week saw the reporting of better-than-expected jobs numbers being met with a big stock market dip because of fear that lower unemployment might lead to a rate hike.

On top of all this is the question of whether we are witnessing a bubble in A.I. spending. A.I. has been the sole force driving growth in the American economy for the past year or so and there is some suspicion that it is a bet that is never going to pay off, at least to the point where it will justify the money invested in it. Not to mention the fact that while there will be some A.I. winners, there will be more losers, and those losers are going to make a lot of money disappear.

I have no idea what’s coming next. Contraction? Correction? A dip? A crash? A recession? Stagflation? One thing I do feel confident about is that the market at least as a whole isn’t going to keep rocketing up to the degree it has over the last decade. I do a bit of investing myself and I find nearly everything in the stock market to be overpriced right now. On the other hand, I don’t think people are going to start taking their money out and sticking it under their mattresses anytime soon either. With so much money being passively invested (that is, just buying an index) a lot of inertia builds up in the system. It will take quite a shock to upset all that, but it feels like we’re primed for a shock now and I don’t think it will be easy to ignore when it arrives.