One of the most anticipated recessions in U.S. history may be approaching, as economist David Rosenberg expresses concern over the economy’s resilience in the coming years. Rosenberg, who leads Rosenberg Research, suggests that the U.S. economy could experience a significant contraction by 2027. He attributes this potential downturn to a depletion of key financial support mechanisms that have been instrumental in maintaining growth, specifically large fiscal stimulus and substantial investments in artificial intelligence (AI).
In an interview with Business Insider, Rosenberg remarked that the economy might see a “lifeline” in the immediate future, lasting for two to three months following the issuance of tax refunds. However, he warns that this could be short-lived, as the lack of continuing fiscal support could create a “vacuum” in business spending.
Historically, recent U.S. economic growth has been bolstered by substantial fiscal measures. The expansion of tax cuts initiated under President Trump, known as the “One Big Beautiful Bill,” has been pivotal in stimulating economic activity. Long-term estimations from the Tax Foundation indicated that this legislation could enhance GDP by 1.2 percentage points. However, Rosenberg predicts that following the midterm elections, particularly if Democrats gain control of Congress, legislative gridlock may hinder any further fiscal initiatives, effectively resulting in a lack of support for economic growth by 2027.
Rosenberg also pointed to the concerning trajectory of AI-related investments, predicting that this spending wave is likely to peak by 2026. Major tech corporations, including Amazon, Google, Meta, and Microsoft, are projected to invest close to $600 billion in AI-related capital expenditures this year alone. According to his estimates, these AI investments have contributed to approximately 90% of economic growth in recent years, largely driven by the wealth effect tied to rising tech stock valuations.
As these two crucial support systems begin to wane, the overall health of the economy appears increasingly fragile. The U.S. real GDP showed a modest annualized growth rate of 1.4% for the fourth quarter, a stark decline from the more robust 4.4% growth rate seen in the previous quarter. Additional stressors include a significant slowdown in hiring and an uptick in layoffs, further compounding the financial pressures facing American households.
The personal savings rate, an important indicator of consumer financial health, has fallen to 3.6% at the end of last year, a sharp decline from early 2025 levels. With concerns mounting that a correction in the stock market could diminish consumer wealth, Rosenberg warns that decreased spending could trigger an economic recession. He emphasizes the consequences of stagnant job and income growth, suggesting that such a scenario could force consumers to reduce spending to align with their actual income levels.
Amid fluctuating market conditions and geopolitical tensions, including the ongoing conflict in Iran, discussions of recession and stagflation are resurfacing on Wall Street, prompting investors and economists alike to reassess the current economic landscape.
