The Great Crash of 2026?

/ Alex Good

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.

13 thoughts on “The Great Crash of 2026?”

  2. Yeah, the US is just waiting for another economic beating. With personal debt higher than it has ever been, and that debt in ALL economic brackets, something has to give.
    Makes me glad we’re about to pay off our condo in a year or so. One less thing to worry about.

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    • And it’s going to be bad everywhere because whatever happens in the U.S. is going to spread. I’m sure there is going to be some kind of correction, I just don’t know what form it’s going to take or how extreme it will be.

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      • I know the Nasdaq just lost like a trillion dollars of value on thursday or friday, but since that is less than 5%, I’m not sure people are worried.
        I do think this whole playing around with factors to keep economies going is going to bite the entire world. It’s been going on for at least 100’ish years now though, so many people think there are no consequences. I think we just don’t understand the consequences yet.

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      • I think there’s a lot of air in the Nasdaq, even though the earnings the big tech companies are booking have been impressive.

        What I find most surprising is that the Fed really hasn’t stopped printing money (quantitative easing) since Covid. While the U.S. national debt has just been going straight up. People will say that doesn’t matter, but at some point it does, especially if the economy isn’t growing. And outside of A.I. build-out it hasn’t been.

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      • It makes me interested in how other countries are doing in comparison to the US on the same metrics. Our numbers are bad. But I never see hard numbers in comparison. And I don’t even know where to get that info 😦

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      • Sometimes the numbers are unavailable or unreliable, like anything coming out of China. Sometimes they’re hard to compare, like with Japan’s massive debt. A lot of factors make the U.S. its own beast anyway, like the dollar being the default global currency. And then there’s a lot of manipulation going on.

        I’m suspicious of anyone who says they know what’s happening.

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