Economist Gary Shilling sees a potential 30% stock market drop and a likely recession by year end.
His monthly Insight newsletter, released Wednesday, included comments he made recently to Business Insider, which reported that Shilling considers a recession this year nearly inevitable given various vulnerable points in the economy.
Shilling told the publication the S&P 500 could drop by as much as 30% in a bear market that appears by year end, per his newsletter. The economist cited a housing market frozen by high interest rates, slow capital expenditures, pressures on consumers and slow disposable income growth.
"We continue to think there's a 60% to 70% chance that a recession unfolds in the next year. We also don't rule out a period of stagflation with high inflation, elevated unemployment and slow economic growth, as we've discussed in recent reports," Shilling said in his newsletter.
Shilling also suggested it's unlikely that new Federal Reserve Chairman Kevin Warsh will cut interest rates soon, which he said will displease President Donald Trump.
Stubbornly high inflation resulting from last year's tariffs and higher oil and gas prices driven by the Iran war make cuts unlikely, he said, noting that several Fed members show no inclination to lower rates. Warsh also needs to show he's independent from Trump, who tried to pressure previous Fed Chair Jerome Powell to lower interest rates, Shilling noted.
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