Wall Street analysts are describing the current moment as “crazy days” and “silly season” even as one of its most bearish forecasters warns of a “late-stage” AI bubble—and now the Federal Reserve may be about to do the one thing that has historically ended booms like this, over the objections of two of its own governors.
London-based forecaster Capital Economics has spent the past several months building the most detailed public case yet that the AI trade is a “late-stage bubble.” In a September 10 report, senior markets economist James Reilly screened eight categories of market indicators and found most sitting at or near levels that have historically preceded major peaks—a warning serious enough that the firm now forecasts the S&P 500 will start cracking next year, eventually falling by at least 30% from its high, one of the seven worst crashes in the past century.
