Gary Shilling, an economist known for his pessimistic forecasts and for having anticipated the recession of 1969–1970, warns that the United States economy could face another contraction in 2026.
Gary Shilling, known for forecasting the 1969-1970 recession/PHOTO:X
In an interview with Business Insider, Shilling said a recession is “almost inevitable” by the end of the year, pointing to several risk factors, including a “frozen” housing market, lower corporate investment and weaker consumption.
“Stocks are very expensive and we are likely to see a major correction in the relatively near future,” he said, estimating that a 20 percent to 30 percent decline would not be unusual from a historical perspective.
At the same time, the economist emphasized that the risks are not always obvious: “I have built my career on identifying hidden vulnerabilities, and even if there is no clear signal at the moment, that does not mean that they do not exist.”
Signs of weakness in the economy
According to Shilling, the US housing market remains stuck as both buyers and sellers hesitate to trade amid high interest rates. At the same time, the limited supply of affordable housing and the rise in foreclosures point to increasing pressures on landlords.
Another indicator cited is the reduction in capital investment by companies. The cited data shows that this spending has grown by just 3.9% by the end of 2025, compared to a peak of 24% during the pandemic.
In addition, consumption — considered a key pillar of the US economy — is showing signs of weakness. The Federal Reserve's preferred gauge of inflation rose 0.7 percent in a month and 3.5 percent from a year earlier, suggesting persistent pressure on purchasing power.
Possible solutions, considered improbable
In Shilling's view, avoiding a recession would require either fiscal stimulus or a recovery in consumption — scenarios he considers unlikely.
“The situation is fragile, both in terms of income and people's willingness to spend”he stated.
Divided views among economists
However, assessments of the evolution of the American economy in 2026 remain divergent.
Alicia Levine, head of investment strategy at BNY Wealth, recently said she does not anticipate a recession this year, citing rising corporate earnings.
Instead, billionaire investor Leon Cooperman warned that the economy was headed for a contraction, pointing to high market valuations and risks.
The debate reflects lingering uncertainty about the direction of the global economy amid multiple pressures on growth.
Food inflation could become the main concern of investors in 2026
Rising fertilizer costs and shrinking acreage for US farmers could increase pressure on food prices as investors watch food security risks more closely, according to marketwatch.com.
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Although the United States is not currently facing a supply crisis — with sufficient stocks of meat, grains and eggs — food prices remain high, about 20 percent above 2022 levels.
Rising costs and global effects
Analysts point out that geopolitical tensions and disruptions in global trade, including those related to shipping through the Strait of Hormuz, are contributing to higher prices for fuels and fertilizers — essential items for agriculture.
Even though the US is not directly dependent on this route for agricultural production, Europe and Asia are more exposed, which can lead to a global competition for resources and increased costs including for US farmers.
According to a recent World Bank report, fertilizer prices could rise by more than 30% in 2026, amplifying the risks of food inflation globally.
Farmers reduce production
In the United States, farmers are already facing significant financial pressures. Production costs were rising even before the recent escalation of geopolitical tensions, and many farmers were unable to secure favorable prices for fertilizer.
A survey among farmers shows that a majority cannot afford the necessary amounts of fertilizers, which causes a reduction in cultivated areas. The consequence could be a reduced supply of agricultural products and, implicitly, higher prices for consumers.
The lessons of recent crises
Current developments are compared to the impact of the war in Ukraine on agricultural markets. In 2022, supply concerns led to sharp increases in grain prices, before they later stabilised.
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But experts point out that markets can react quickly when geopolitical risks coincide with problems in supply chains, particularly in the fertilizer sector — a key element for global food production.
Impact on markets and investors
In this context, investors are increasingly watching the agriculture and raw materials sector, including companies involved in fertilizer production and food supply chains.
At the same time, government policies remain uncertain. Recent legislative initiatives in the US do not yet provide clear solutions to reduce costs, and proposed measures to increase access to fertilizers may have limited effects.
Perspectives
Experts warn that if geopolitical tensions persist and production costs remain high, the effects will gradually flow from farmers to grain markets and finally to consumers.
Although US agriculture remains stable in the near term, risks are not eliminated. Rising fertilizer prices and global competition for resources could make food inflation a central issue for the global economy in the coming period.
