"The Big Short" predicts the United States will face a "major recession" next year.

Economist David Rosenberg warns that the two major engines supporting the U.S. economy are stalling simultaneously, and a severe recession may arrive in 2027.

On March 10, according to Business Insider, renowned Wall Street bear and Rosenberg Research president David Rosenberg recently stated that, as the effects of fiscal stimulus fade and AI-related capital spending peaks, the U.S. economy could fall into a "very severe recession" in 2027.

He pointed out that after Americans receive tax refunds this year, the economy might have a "lifeline" for another two to three months, but will face harsher tests afterwards.

Rosenberg also warned that if the stock market experiences a sharp correction and the wealth effect is damaged, consumer spending will shrink further, enough to trigger a recession. Meanwhile, the market turmoil caused by the Iran war has prompted Wall Street to reintroduce recession risks and stagflation expectations into the discussion agenda.

Two Pillars Shaking Simultaneously

Rosenberg believes that in recent years, the U.S. economy has withstood recessionary pressures mainly due to two forces: large-scale fiscal stimulus and the AI investment boom.

On the fiscal side, the "big beautiful act" signed by Trump continued the 2017 tax cut policy and introduced a series of stimulus measures. According to Tax Foundation estimates, this act could boost long-term GDP growth by 1.2 percentage points.

However, Rosenberg believes this bonus will face risks after the midterm elections this November—he predicts that the Democrats may regain control of Congress, leading to legislative deadlock, and fiscal stimulus in 2027 may be "unattainable."

On the AI investment side, Rosenberg pointed out that the capital expenditure boom by tech giants is expected to peak at some point in 2026.

According to Business Insider's analysis of company filings, Amazon, Google, Meta, and Microsoft—the four core AI companies—are expected to invest nearly $600 billion in AI-related capital expenditures this year. Rosenberg estimates, including the wealth effect from rising tech stocks, AI capital spending has contributed about 90% to recent economic growth.

"Next year, we will simultaneously remove both crutches. Enjoy the capital spending boom while it lasts."

Cracks in Economic Fundamentals

As these two major driving forces fade, the U.S. economy's own resilience is also weakening.

According to the U.S. Bureau of Economic Analysis, the annualized real GDP growth rate in the fourth quarter was only 1.4%, a sharp slowdown from the previous quarter’s 4.4%. The labor market is also under pressure, with hiring cooling significantly and layoffs climbing over the past year.

Pressure on the consumer side is also significant. The personal savings rate—a key indicator of consumer financial health—fell to 3.6% at the end of last year, down 150 basis points from early 2025.

"No job growth, no income growth," Rosenberg said. "Imagine what happens if people are forced to tighten their belts and spend based on actual income."

Stock Market Correction May Trigger Recession

Rosenberg specifically emphasized the key role of stock market risks in this round of recession logic.

He said that if the stock market has a substantial correction, the wealth effect will be weakened, restraining consumer spending and forming a self-reinforcing downward economic cycle, ultimately sufficient to trigger a recession.

"Corporate spending will be in a vacuum," he said, "we may see a very severe recession in 2027."

This warning is not isolated. The market fluctuations caused by the Iran war have prompted some on Wall Street to re-focus on recession warnings and stagflation risks.

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