Schilling's Warning: Is the US Stock Market Crashing 30%?

Global financial markets , particularly in the United States, have been experiencing a state of excessive optimism since the beginning of this year, with the S&P 500 index consistently breaking new record highs.

But behind this optimism, concern is growing among economic giants and analysts, led by veteran Gary Schilling, who recently issued a dramatic warning about the possibility of a violent correction that could wipe out US markets by up to 30% of their current value.

Are markets truly at a historic turning point? What are the indicators of a potential collapse?

Who is Gary Schilling? And why is he so popular among investors? Gary Schilling has been a fixture among American economists for more than four decades, thanks to his ability to read macroeconomic indicators and his accurate predictions of major crises.

He is best known for predicting the 2008 housing bubble years before it actually happened, earning huge profits and widespread fame as a consultant to financial institutions and the economic media.

Given the current record highs, investors are taking Schilling's warnings very seriously, as he is among the few able to distinguish between a surge of normal optimism and the risk of unintended market risk.

The stock market is experiencing intense speculation. The dramatic rise in stock prices, particularly in technology , AI, and cryptocurrency companies, is the focus of Gary Schilling's recent warnings.

He describes the current market as "full of speculation," and asserts that what drives the index upward is not economic fundamentals or corporate earnings, but rather "the influx of liquidity and the investments of speculators seeking quick profits."

Schilling declares that mainstream sectors such as artificial intelligence and cryptocurrencies represent "economic decoration" and not the essential components that support a cohesive, real economy.

"This is not the strength of the economy, but rather a decoration that appears at the end of economic upturns and is a prelude to the bubble bursting," he said.

Strategic warnings from investment banks: Danger indicators are increasing Schilling is not alone in his pessimism. Recent reports from Bank of America show that more than 60% of bear market indicators flash red, a percentage that has historically preceded many major market reversals.

The research team led by Savita Subramanian asserts that stock valuations are now "very high by all measures," with the index currently trading above dot-com bubble (2000) levels on nine different metrics.

The Warren Buffett Index, which measures total market capitalization against GDP, has surpassed 200% for the first time since the dot-com peak, which Buffett himself considers a serious warning sign.

The dominance of technology companies and booms not supported by real productivity With the rise in the shares of the seven largest companies: Meta , Amazon, Nvidia, Microsoft, Apple , Tesla, and Alphabet, market concentration has reached a record high. These companies alone represent approximately 34% of the final weighting of the S&P 500 index, while the top ten companies account for more than 38%.

This concentration is considered highly risky, because any decline in the performance of one major company could have a severe impact on the index as a whole.

The problem is not limited to high prices, but also extends to weak actual earnings growth, as stock prices have far outpaced earnings growth rates, based on future expectations that may not actually be realized.

Technical analysis shows that the CAPE index is more than 45% above its historical average, similar to pre-crash conditions in previous crises.

Is investing in artificial intelligence and cryptocurrencies an opportunity or a trap? There's no doubt that AI technology has already delivered huge productivity gains for some companies, such as Nvidia and Microsoft, and alone contributed more than 1% to US GDP growth in the first half of 2025.

However, Schilling warns that this growth is speculative in nature, with company valuations doubling at a rapid pace without actual earnings or strong financial results.

Digital currencies, led by Bitcoin, have risen to unprecedented levels, fueled by perceptions of a global shift in trade and finance away from the dollar system.

But Schelling asserts that these markets are "more fragile," because their value is based primarily on speculation and confidence, rather than on a stable production or economic foundation.

US Labor Market and Consumption: Signs of a Slowdown In addition to market indicators, Schilling notes that the US labor market is beginning to show signs of relative weakness, with the unemployment rate remaining relatively low, wage growth slowing, and US consumer debt reaching record levels as prices and inflation continue to rise.

This combination of slowing growth and consumer fatigue portends a possible transition to a mild recession, accompanied by a correction in stock prices and a shift in investments toward safe assets.

What will the correction be according to Gary Schilling's warnings? Schilling predicted that the next correction would not necessarily be sudden or catastrophic, but rather more of a gradual series of sell-offs, starting with a loss of confidence in technology stocks and then spreading to other sectors. If a 30% correction occurs, the S&P 500 would fall to levels close to 4,700 points, completely erasing the gains of the past two years.

Bank of America analysts support this scenario, pointing to the risk of forced selling by large investment funds if debt market turmoil increases or borrowing costs rise suddenly. In this case, the market could experience a rapid sell-off reminiscent of the March 2020 crisis.

Dollar and government debt Schilling emphasizes that the US dollar will remain dominant in the global financial system, despite attempts to push for alternatives in Asia and Europe. He asserts that the absence of a real competitor and the weakness of the euro and yuan are keeping the dollar in its position.

At the same time, he warns of the continued rise in US government debt, which has become a ticking time bomb that could impact markets if the government does not return to more disciplined spending and financing policies. This threatens to make markets more vulnerable to any sudden crisis.

Technical and financial vision for the near future From a technical analysis perspective, momentum and volatility indicators have reached historically high levels, meaning that any slight volatility could turn into a massive sell-off if investors lose confidence.

Some statistical models predict a correction wave between the fourth quarter of 2025 and the first half of 2026, especially if profits decline or major companies begin announcing results below expectations.

What's next for investors based on Schilling and Bank of America? Schilling and Bank of America's warnings point to three possible scenarios for next year:

A central correction of up to 30% will bring the indices back to more realistic historical levels and create new opportunities for investors after the decline. A medium-term economic recession, accompanied by a gradual decline in industrial activity and a slowdown in growth that is difficult to recover from quickly. Redistributing investment toward traditional sectors, away from technology and digital speculation, with renewed interest in basic industries and energy. Amid escalating speculation and warning signs, the future of US markets remains uncertain amidst anxiety and anticipation. Will we soon witness a historic correction that will restore normalcy?