The U.S. economy is slowing. In the second quarter of 2026, real GDP grew at an annual rate of just 1.5 percent, down from 2.1 percent in the first quarter and well below the 2.8 percent growth the economy recorded during President Biden’s final full year in office.

​

We have a $1.8 trillion deficit (nearly 6 percent of GDP) and so much debt ($40 trillion) that it exceeds 100% of our entire GDP. Donald Trump is now solely responsible for roughly 29 percent – $11.8 trillion – of America’s debt between his two terms, while all the other 45 presidents combined are responsible for the other $28.3 trillion.

​

According to Fortune magazine, the U.S. Treasury borrowed $155 billion every single month during the first nine months of this fiscal year and is now paying $24 billion a week in interest on its debts. Net interest is expected to exceed $1.1 trillion this fiscal year – more than the defense budget – and more than double to $2.1 trillion by 2036. Only Social Security consumes a larger portion of the federal budget than net interest.

​

And it’s just getting worse. The Congressional Budget Office (CBO) projects that the annual federal deficit will climb from $1.9 trillion in 2026 to $3.1 trillion by 2036 and the federal debt held by the public will reach 120 percent of GDP by 2036… far exceeding the previous record reached in the aftermath of World War II.

​

By the summer of 2026, inflation was again outpacing wage growth. In July, wages rose 3.2 percent from a year earlier, while consumer prices rose 3.4 percent. Wage growth slowed further to 3.1 percent in August.

​

While the U.S. labor market remains in reasonably good shape by some key metrics – – the economy continued adding jobs through August 2026, and the unemployment rate fell from 4.2 percent in June to 4.1 percent in August – – finding a new job has become increasingly difficult for many unemployed Americans. In August, 27 percent of those unemployed had been out of work for six months or longer, near its highest level since the job market was recovering from the Covid-19 shock. That’s around 1.9 million Americans who had been without work for at least 27 weeks.

​

By the end of 2025, electricity prices were rising far faster than inflation, increasing 6.7 percent from a year earlier. During the first half of 2026, average residential electricity prices were 7.4 percent higher than a year earlier. As bills climbed, so did shutoffs. Nearly 14 million households have fallen behind on utility bills, and residential disconnections increased in most states. Rising fuel costs and growing electricity demand are likely to put further pressure on bills.

​

The squeeze just goes on and on. The average premium for a benchmark health insurance plan on the ACA marketplaces has risen 26 percent from 2025 to 2026, and the number of uninsured Americans is rising. The average rate on a 30-year fixed mortgage climbed to 6.71 percent in early September 2026, its highest level since June 2025.

​

At the end of 2025, Americans were already paying roughly 24 percent more for goods and services than at the end of 2020, and that was before the war with Iran upended global energy markets. Inflation jumped from 2.4 percent in February to 3.3 percent in March, 3.8 percent in April and 4.2 percent in May, when gasoline prices were more than 40 percent higher than a year earlier. Prices at American pumps were nearly a dollar higher by Labor Day 2026 than the year before… and were the highest Labor Day gasoline price on record. Diesel prices also reached a record national average of $5.85 per gallon in early September.

​

And it’s important to remember that inflation surged even after, for much of 2025, large retailers tried to avoid raising prices by absorbing at least some of the higher costs caused by the Trump/Vance administration’s tariffs. However, by the end of the year, companies were warning they would be increasingly passing those higher costs through to consumers.​ This was bad news because consumers were already spending far less… and that was before the war with Iran. By April 2026, the University of Michigan’s consumer-sentiment index had plunged to 49.8, near its historic lows, falling again to 51.7 in August – 11 percent lower than a year earlier.

​

Indeed, the divide between the wealthy and lower-income households is never starker than when you look at who is spending money today. In 2025, the top 10 percent of earners accounted for an estimated 49 percent of consumer spending, up from 36 percent three decades earlier. By early 2026, the top 20 percent of households accounted for nearly 60 percent of personal outlays, while spending among the bottom 80 percent failed to keep pace with inflation.

​

While it’s true Americans across-the-board spent more during the 2025 holiday season, many increasingly relied on debt to do it. Buy now, pay later (BNPL) borrowing has grown about 20 percent a year since 2021, reaching an estimated $70 billion in transactions in 2025. By 2026, 47 percent of BNPL users reported making at least one late payment in the previous year, up from 41 percent in 2025 and 34 percent in 2024. More than half said they needed BNPL loans to make ends meet.

​

In fact, America’s total credit-card balance reached $1.25 trillion in the first quarter of 2026, the highest first-quarter balance since the Fed began recording the measure in 1999. In the second quarter, the balance reached $1.26 trillion. Nearly 13 percent of balances were at least 90 days delinquent, only slightly below the 15-year high reached earlier in the year. Meanwhile, average credit-card interest rates remain near 21 percent – up from roughly 14.5 percent in early 2022 – putting additional strain on borrowers.

​

Other signs of financial strain are showing. The share of subprime auto loans at least 60 days past due hit a record 6.9 percent in early 2026. Repossessions have also risen sharply as borrowers struggle with high vehicle prices, interest rates and monthly payments.

​

Thanks to tariffs, inflation, supply chain disruptions, and broader economic uncertainty, small businesses have faced considerable pressure. In August, 62 percent of small-business owners reported some supply-chain disruption, while inflation was cited as a top concern. This matters because America’s 36.2 million small businesses account for 43.5 percent of GDP and employ 62.3 million people – nearly 46 percent of private-sector workers. Over the long run, they have generated about 60 percent of net new jobs.

​

Small businesses aren’t the only ones struggling. U.S. corporate bankruptcies surged in 2025 to levels not seen since the aftermath of the Financial Crisis as businesses dealt with high interest rates, inflation, tariffs and supply-chain pressures. And the trend continues. Around 27,000 business bankruptcies were filed in the 12 months ending June 2026, up 17 percent from a year earlier. Industrials and consumer-facing companies have been among the hardest hit.

​

Meanwhile, more red flags are waving in global bond markets, as investors worry about mounting government debt, deficits and inflation. In August 2026, the yield on 30-year U.S. Treasurys climbed above 5.3 percent, its highest level since 2007, and remained near multi-decade highs in early September. Higher Treasury yields ripple through the economy, putting upward pressure on mortgages, auto loans and business borrowing costs.

​

President Trump keeps touting the stock market as proof that the economy is strong. Over the summer he said things like “we've had 80 days where the stock market hit all-time highs” and called it the “the hottest stock market in history,” and, at the September Republican “convention” before the midterms, he repeatedly said, “Our stock market hit records.”

​

Ironically, this is the part that should worry us the most. It’s true that corporate earnings growth is strong, but the multiple that investors are paying for those earnings is now two and a half times greater than the historical average. This signals to me that the market may be acting irrationally, allowing fantasy to outweigh smart business sense.

​

Just look back at 2025. In many ways, the economic data from 2025 is contradictory. Less than one week apart in December, one government report showed job growth contracting and unemployment rising and another showed the economy expanding at a robust 4.4 percent annual rate in the third quarter (helped greatly by wealthy Americans spending lots of money; the U.S. spending big on our military; and outrageous spending on A.I. infrastructure).

​

And despite trade wars, gutted immigration, and other policies pushed on America by the Trump/Vance administration – the negative consequences of which were already showing up big time on so-called “Main Street” – Wall Street just kept humming along, breaking record after record in 2025. Even after some late-year wobbles, the S&P 500 finished 2025 up 16.4 percent – or nearly 18 percent including dividends.

​

But this is where it goes from concerning to downright chilling. When you look closer, much of the strength in the stock market has been tied to the artificial-intelligence boom. In fact, A.I. has become so economically significant that it increasingly skews the headline numbers – affecting everything from stock-market performance and corporate profits to trade, investment, and even the pace and composition of U.S. economic growth.

​

By 2025, hundreds of billions of dollars a year were pouring into A.I. – from chips and software to massive data centers and the power infrastructure needed to run them. Federal Reserve researchers estimate that A.I.-related investment categories accounted for roughly 39 percent of U.S. economic growth during the first nine months of 2025… an even greater contribution than comparable technology investment made during the dot-com boom.

​

For much of 2025, the seven technology giants known as “The Magnificent Seven” – Alphabet (Google), Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla – represented more than a third of the S&P 500’s value.​ BUT, if you set everything A.I.-related aside, the stock market in 2025 was relatively weak as tariffs and economic uncertainty had already led to both declining sales and investment. The Russell 2000, an index that tracks roughly 2,000 smaller U.S. companies, fell nearly 5 percent in the one-month period ending November 21, 2025.

 

This, of course, leads to the inevitable question: What if the A.I. boom goes away?

​

Although plenty of investors continue to pour billions into A.I. – some estimates say 3 percent of our GDP by 2027 – there are signs the A.I. craze may have already started to slowly unravel. In the end, only Alphabet and Nvidia outperformed the S&P 500 in 2025, and at the beginning of 2026, five of the “Magnificent Seven” stocks were performing worse than the broader market benchmarks, signaling that the group of technology giants that had dominated Wall Street in previous years was beginning to fracture.

​

This trend has continued. By July 2026, five of the seven were still trailing the S&P 500, while the group substantially underperformed the broader market. The companies increasingly stopped trading as a unified bloc, leading major investors and analysts to question – and in some cases explicitly declare an end to – the “Magnificent Seven” as a meaningful description of stock-market leadership.

​

Consumers and the American people also have a vote. Many companies across America are rebelling against high prices and are starting to use lower-priced A.I. models. Then there are the data centers. The United States already has more than 3,000 operational data centers, with another 1,500+ in development – Americans are increasingly pushing back against them.

​

Communities are quickly realizing that these data centers greatly impact their existing infrastructure, electricity demands, utility rates, water consumption, air and water quality… basically, their overall quality of life and well-being. 

​

The worst part may be the noise pollution, which is intense. Imagine a constant low-frequency vibration that feels like you’re standing in a nightclub right between the band’s subwoofer and bass drum. People unfortunate enough to experience this nightmare report chronic sleep deprivation, headaches, internal ear pressure, and increased anxiety.

​

The public backlash against data centers has gotten so intense that, in 2025, local opposition blocked or delayed at least 48 data-center projects worth $156 billion. In just the first three months of 2026, at least 75 projects worth another $130 billion were blocked or delayed. By summer, polling showed that seven in ten Americans opposed having a data center built in their own community.

​

As a result of all these things, many people think we could be in yet another speculative financial bubble (think: dotcom in the late 90s/2000 and U.S. housing in 2007-8). There are several parallels, the number one being the insane level of extravagant investment in A.I. by a plethora of enamored investors that seems to be completely detached from the amount of profit A.I. can plausibly generate – the hallmark of a bubble.

​

Another hallmark is that this binge is fueled by massive debt, which usually doesn’t end well… and the ATM machine ain’t slowing down. Morgan Stanley estimates that capital spending by the five largest A.I. “hyperscalers” – Alphabet (Google), Amazon, Meta Platforms, Microsoft, and Oracle – will reach around $800 billion in 2026 and an astonishing $1.2 trillion in 2027. The $1.2 trillion figure is especially instructive because Morgan Stanley’s estimate was only about $450 billion for 2027 a year earlier… meaning its forecast nearly tripled in roughly a year.

​

In October 2024, OpenAI, the company behind ChatGPT, raised $6.6 billion at a valuation of $157 billion – at the time one of the largest venture-capital rounds ever. That sounds like a lot of dough, but it’s even crazier when you hear that the investors had been told that OpenAI could lose $44 billion over the following five years. At the time, JPMorgan estimated that the tech industry would have to generate $650 billion in revenue every single year for A.I. investments forecast through 2030 to earn even a modest 10 percent return. Uh oh.

​

And that was only the beginning. In 2025, OpenAI raised another $40 billion at a $300 billion valuation. Then, in early 2026, investors committed a staggering $122 billion more, valuing the still-unprofitable company at $852 billion. OpenAI’s revenues were growing just as spectacularly – reaching an annualized rate of more than $40 billion by August 2026 – but so were the enormous costs of the computing infrastructure required to build and operate its AI systems.

​

… and people are catching on. At the end of 2025, CoreWeave – an A.I. cloud-computing company backed by Nvidia and major investors—lost $33 billion in market value, or 46 percent, in just six weeks. There were several reasons for this, including a failed acquisition, data-center construction delays, and concerns about its enormous debt and spending, but one of the main reasons was that prominent short-seller Jim Chanos, famous for predicting the collapse of Enron, started publicly questioning CoreWeave’s business model.

​

CoreWeave recovered substantially in 2026 as revenues surged, but concerns persisted: the company continued losing hundreds of millions of dollars while spending tens of billions on A.I. infrastructure, and the cost of insuring its debt against default rose to unusually high levels… all while Chanos continued publicly criticizing the company.

​

These signs are something we can’t ignore. We already had a wake-up call in January 2025, when America was blindsided by the Chinese scrappy startup DeepSeek’s latest A.I. model. Although the tech itself was comparable to models recently released by U.S. companies, it appeared to require far fewer cutting-edge computing resources than many in Silicon Valley had assumed necessary…. and, in the blink of an eye, DeepSeek-R1 challenged the assumption that the United States was the dominant, undisputed force in A.I.

​

DeepSeek-R1 triggered a financial panic, erasing a trillion dollars of market value in a single day. The day before its release, Nvidia – the dominant computational chip dealer for the A.I. boom – was the most valuable company in the world. In the days after the release, it lost $593 billion of value, a loss greater than the entire market cap of ExxonMobil and the worst day for any stock in history. (Note: That said, in July 2025, Nvidia became the first public company worth $4 trillion and, three months later, the first to reach $5 trillion).

​

DeepSeek-R1 stoked fear from Wall Street to Silicon Valley, and it signaled to the entire world that the battle between the United States and China for tech supremacy had only just begun.​ 

​

The battle lines were reset once again in June 2026, when it was announced that Z.ai, a Chinese start-up, released a model called GLM-5.2 that matched the performance of the powerful Mythos model in certain cybersecurity scenarios – putting Chinese companies neck and neck with America’s Anthropic, one of the most advanced A.I. laboratories on the planet.

​

The following month, yet another Chinese start-up, Moonshot AI, released Kimi K3 – a model, its developers claim, that is now the world’s largest open-source A.I. system and performs as well as leading models from OpenAI and Anthropic on several key tasks.

​

Indeed, according to Vals AI, a company that evaluates the performance of A.I. models, Kimi K3 performs just below Anthropic’s Fable 5 model and outperforms OpenAI’s flagship GPT-5.6 Sol model. The AI benchmarking site Artificial Analysis ranks Kimi K3 third for intelligence, behind Anthropic’s Claude Fable 5 and OpenAI’s GPT-5.6 Sol. U.S. stocks immediately dropped on the news of both of these latest developments, as investors sold shares of American chipmaking companies Nvidia, Intel and Micron Technology.