“Those who cannot remember the past are condemned to repeat it.”
–George Santayana
I’m no stranger to an unpopular opinion (IYKYK), and I have one to share. I think we’re much closer to a Global market reset than we collectively want to acknowledge. It feels risky to make that proclamation - and maybe I’ll delete this article later. I am certainly not helping my own businesses expounding pessimistic prognostications about the market. But here’s the thing… If I’m wrong, we all win. But if I’m right, those who are prepared for a crisis will create their own opportunities proactively vs reactively. As the CEO of the most innovative real estate technology firm on earth (in my humble opinion) that I forged in the depths of the pandemic, this is where my interests lie, so I’m willing to go out on a limb with a controversial statement.
These are the signs I’m seeing that a crash is coming, and what you should do to prepare. I hope I’m wrong.
Where We Fall In The Economic Cycle
Expansion, peak, contraction, trough: This is the economic (or business) cycle. Or in the words of Warren Buffet from a 2008 Charlie Rose interview, every market cycle has the innovator, the imitator, and then the idiot. How long each of these phases lasts can vary, typically anywhere from one to ten years – and what catalyzes the movement from one phase to another can be extremely hard to pin down, at least until after the fact. So where are we now?
The U.S. experienced a long period of expansion after the Great Recession; from 2010 until Covid hit in early 2020, the economy was in an expansion phase with high employment, low interest rates, and plenty of purchasing power. In February 2020, unemployment was at only 3.5%, then Covid hit, and we experienced the shortest recession on record, with a very fast and severe period of contraction, hitting the trough only 2 months later in April with an unemployment rate of 14.8%. Pandemic stimulus was issued en masse, and people returned to work, pushing us back into expansion by that summer. But, this expansion cycle has looked different from any other in history as Covid backlash broke the typical mold for economic cycles. Because of the stimulus measures, including artificially low interest rates and direct payments to Americans and businesses, inflation took hold quickly, peaking at 9.1% by June 2022, driven in large part by astonishing real estate appreciation. This “easy money” policy leading to rapid and unsustainable expansion is reminiscent of the period leading up to the 1929 crash.
For the past several years, red flags for recession have been waived, but the contraction has yet to come. The Fed seemed to have achieved a “soft landing,” defined by taming inflation by raising interest rates without triggering a spike in unemployment or a significant slowdown in GDP, but inflation has since heated back up, and consumer sentiment has fallen. Meanwhile, the stock market has soared, riding high on AI speculation (speculation was another major factor that caused the Great Depression, by the way), but the DeepSeek disruption shows us that nothing lasts forever.
Despite the strong wages, low unemployment, and solid consumer spending that we enjoy today, ask the average American how they feel the economy is doing, and they’ll likely tell you it’s not great. Many have dubbed this phenomenon the “vibecession,” but I’m not so sure. The fundamentals are… wonky, for lack of a better term. What is clear is that we’re either still in expansion but showing significant signs of strain, or we’re at peak. After the peak comes the fall.
The Cracks Are Showing
Many recession harbingers are looming:
- Household debt is at an all-time high, and delinquencies are increasing.
- Banking stability is precarious as commercial real estate loans struggle.
- Housing inventory is rising nationwide, and mortgage applications remain suppressed due to high mortgage rates.
- Housing remains unaffordable for most Americans. The income needed to purchase a home has tripled, while wages haven’t even doubled since 2012.
- The share of homebuyers who are purchasing their first home has shrunk to an all-time low of 24%
- The rental market is cooling.
- Consumer confidence is wavering and nearing levels that typically indicate a recession is imminent.
- Bond yields keep nearing 5% – a level not seen since before the Great Recession.
- There was a 69% increase in retail stores closing in 2024.
- Warren Buffet has tripled his cash reserves since 2023 to their current all-time high of $325.2 billion.
All of these facts offer an explanation as to why the American consumer feels strained. Still, despite high prices (which won’t fall unless we experience deflation – and then we’ll have bigger problems than the cost of eggs), high interest rates (which I don’t see decreasing much in the near term), and the aforementioned “vibecession,” employment, wages, and spending remain strong. That said, each time a significant positive economic data point has been released over the last few years, the pundits have discussed the surprising resilience of the U.S. economy. The key word here is “surprising.” At the very least, this illustrates that the economy’s balance is shaky. What will finally tip the scales?
Markets Face More Pressures Ahead
Some of President Trump’s policies have been assessed as potentially inflationary, such as tariffs, increased government spending on certain initiatives, and the extension of 2017 tax provisions. Geopolitical tensions aren’t helping, either. The new Department of Government Efficiency (DOGE) headed by Elon Musk has been heralded as the solution to the excess spending that has caused the national debt to soar to its highest level ever, a significant inflationary pressure. Yet, even Musk stated before the election that there would be a period of “temporary hardship” if Trump were to be elected, implying that the economy would rebound and be stronger than ever after that hardship passed. That sounds like the description of a recession to me…
What Should You Do?
Whether you’re with me or not on the timing, we can all agree that we will see another crash somehow, someday. So, how should we prepare? I don’t want to downplay the hardships a recession can cause – lost jobs, business closures, disappearing retirement savings, and falling home values are not to be taken lightly. That being said, recessions tend to catalyze incredible innovation, like the telephone and the personal computer. Even gravity was discovered during a plague (Isaac Newton was sheltering in place to avoid the 1665 plague)! Today, it’s disruptive companies like Amazon during the dot-com burst, and Uber and Airbnb in the wake of 2008, who can win big by spotting gaps in the market.
For individuals who make good bets, there are also untold fortunes to be made – take Bill Ackman, for instance – he cashed in on $3.8B in profits from a total investment of $204M in just under 2 years by correctly predicting (and possibly fear-mongering on CNBC) how Covid would impact markets and the trajectory the recovery would take. John Paulson made and cashed in on similar bets on the housing market in the wake of 2008.
Recessions offer an opportunity for affordability to reset and for the foundation of commerce to shift to better align with the culture. In the next recession, I predict that companies and individuals who focus on two things will weather the storm and emerge from the ashes stronger than the rest:
- Human capital vs AI (organic expertise meets agentic automations to create scale).
- Yesterday’s trash is tomorrow’s treasure.
The future is happening whether you like it or not - so make it your opportunity.