U.S. Economy Shaken by 30% Stock Market Crash Warning, Will Virtual Assets Be the Last Refuge?

▲ U.S. Economy, Bitcoin/ChatGPT generated image ©

A legendary Wall Street veteran has issued a strong warning about the dark cloud of a massive recession that will engulf the United States by the end of 2026. Amid analyses suggesting an irreversible macroeconomic blow is imminent due to a combination of stock market bubbles and shrinking household consumption, the role of virtual assets such as XRP (Ripple), which are being introduced into international payment networks as an alternative to existing financial systems, is gaining new attention.

According to crypto media outlet Finbold on May 3 (local time), renowned economist Gary Shilling, a former chief strategist at Merrill Lynch, predicted in an interview with Business Insider that a recession is highly likely to arrive in the United States by the end of 2026. He pointed to weakening economic fundamentals, slowing consumer activity, and the excessively overvalued stock market as the key causes of this economic slowdown.

Shilling predicted that only massive fiscal stimulus or unexpectedly strong consumer spending could avert a recession, but currently, both are highly unlikely. He noted that high interest rates are suppressing purchasing power and demand, effectively paralyzing the housing market. Furthermore, widespread private sector investment, excluding AI-related fields, grew by only 3.9% as of the end of last year, significantly below the 24% seen during the pandemic era.

Consumer spending, which accounts for approximately two-thirds of U.S. economic activity, is also on thin ice. While real personal consumption expenditures increased by about 2% year-on-year in March, showing superficial stability, analysis suggests that households' purchasing power is on the brink due to high inflation and slowing income growth. To make matters worse, energy prices in March surged by 12.5% year-on-year due to soaring oil prices in the aftermath of the Iran war, marking the steepest increase since 2022. In contrast, the growth rate of real disposable income plummeted to 0.4%, its lowest in three years, and the personal saving rate fell to 3.6%, its lowest since 2022.

Alongside fears of an economic recession, the possibility of a stock market collapse has also come under scrutiny. Shilling warned that stock valuation metrics, such as the Cyclically Adjusted Price-to-Earnings (CAPE) ratio, have reached historical highs comparable to those during the dot-com bubble. Furthermore, the Price-to-Sales (P/S) and Price-to-Book (P/B) ratios for the Standard & Poor's (S&P) 500 index are also setting new all-time highs, terrifyingly amplifying concerns about market overvaluation.

He predicted that while no single catalyst for an immediate market collapse is visible, stock prices could plunge by 20% to 30% if a bear market arrives by the end of 2026. Meanwhile, even amidst such extreme macroeconomic instability, the virtual asset ecosystem is robustly building a new revenue narrative by capitalizing on the crisis in traditional finance, with the International Finance Bank, for instance, newly highlighting XRP's core value as a payment infrastructure through an internal presentation.

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