The stock market is currently experiencing significant volatility, driven by investor anxieties surrounding various factors, including tariffs and advancements in artificial intelligence. Mark Zandi, the chief economist at Moody’s Analytics, has shared an urgent warning about potential economic downturns if existing trends continue. While Zandi’s focus tends to be on the overall economy rather than specifically the stock market, he believes that recent developments necessitate a cautionary outlook.
Zandi remarked on the alarming disconnect between market behaviors and the underlying economy, suggesting that “markets risk moving in a big way” where falling asset prices might further destabilize an already fragile economic landscape. He specifically pointed to current asset valuations, which he considers to be high due to both sound fundamentals and a growing reliance on speculative investing. Investors seem to be banking on the assumption that prices will rapidly rise, fueled by recent trends rather than solid economic indicators.
He emphasized that the risks are not confined to high-risk assets and warned that even traditionally safe investments such as gold and silver, which have surged amid heightened geopolitical tensions in 2025, could also face significant downward pressure. Additionally, cryptocurrencies were included in his warning, indicating that the potential for market correction extends beyond conventional trading assets.
Zandi’s observations are grounded in the mixed signals from the U.S. economy. While the January jobs report exceeded expectations, he remains skeptical about its implications for sustained economic growth. He pointed out that real Gross Domestic Product (GDP) is only growing at a little over 2%, which is below the economy’s potential of approximately 2.5%. Employment levels appear stagnant, and unemployment rates are creeping upward, while inflation persists at a concerning 3%, according to the Federal Reserve’s favored consumer expenditure deflator.
Adding to his concerns is the behavior of the Treasury market, typically a reliable indicator of economic stability. Although he commended the appointment of Kevin Warsh to lead the Federal Reserve, Zandi expressed unease about institutional buyers like hedge funds that stabilize the market. Should these entities become alarmed by the prospect of an unstable U.S. economy, a mass exit could trigger a rapid decline in Treasury prices, resulting in higher interest rates. Such a scenario would complicate borrowing, making it more challenging for individuals and businesses to secure mortgages and loans.
Zandi’s insights provide a sobering perspective on the current state of the economy and the interconnectedness of market behaviors and broader economic indicators. As uncertainty looms, both Wall Street and Main Street may soon face the consequences of market volatility.
