Economy·Wall StreetAmerica is ‘flirting with recession’ if investment slows, according to new modeling—but bubble risk is still smaller than dot-com eraBy Eleanor PringleBy Eleanor PringleReporterEleanor PringleReporterEleanor Pringle is an award-winning reporter at Fortune covering news, the economy, and personal finance.
Eleanor previously worked as a correspondent and news editor in regional news in the U.K.
She her journalism training with the Press Association after earning a degree from the University of East Anglia.SEE FULL BIO A trader works at his desk on the floor of the New York Stock Exchange (NYSE) in New York on October 7, 2025TIMOTHY A.
CLARY/AFP - Getty ImagesOxford Economics warned that America’s heavy reliance on investment leaves its economy vulnerable if the sector slows. Lead economist Adam Slater said U.S.
GDP would have “barely grown” this year without , and a downturn could pull growth below 1% in 2026 while dragging global output lower.
Though exposure is less severe than during the dot-com crash, Slater cautioned that U.S. households’ record stock holdings heighten the risk of financial strain if valuations fall.
There may be some divided opinion among economists the trajectory of the U.S. economy, but one thing they can agree on is that the sector—namely its investment—has been the engine driving U.S. growth.
Investors, whether they’re es or individuals, have had a lot to get excited in recent years.
The rapid interest and development into artificial intelligence has reshaped expectations how efficiently es can operate and what the working world will look as a result.
But Wall Street has also been here before, also with the sector.
While the dot-com frenzy duced many of the household names we still know today, it also ved to be a bubble with trillions of dollars wiped off market valuations.
Analysts are aware that overly-bullish expectations may fall flat—even JPMorgan Chase CEO Jamie Dimon has warned some parts of the current investment cycle will ultimately ve to be in a bubble.
But new modeling from Oxford Economics suggests the popping of these expectations may ve to be a wrench in the works for America’s economy. “The sector has been the key driver of recent U.S.
growth, with surging stock prices and heavy investment in equipment and software,” wrote Oxford Economics’s lead economist, Adam Slater, in a note yesterday d with Fortune. “But this leaves the U.S.
vulnerable if suffers a downturn—without investment, U.S.
GDP would have barely grown in H1 2025, and investment would have actually declined.” Oxford Economics modeled two scenarios off the back of a downturn, an environment where investment slows and stock prices fell in tandem.
The first, a U.S.-centered downturn with modest international spillover would see domestic GDP growth fall to 0.8% in 2026—which Slater writes is “flirting with recession.” The ripple effects would also snag the global economy, slowing it from predicted growth of 2.5% in 2026 to 2%.
For scenario two, Oxford Economics modeled wider international equity shocks similar to levels seen in 2002, with the volatility continuing over several quarters.
Such ramifications would layer on top of the damages outlined to a more U.S.-centric downturn, with world GDP falling to 1.7% in 2026. Additionally, outside of the U.S.
the GDPs of Mexico and Canada would be significantly adversely affected, as well as Asian economies such as Vietnam, Taiwan, South Korea, and Malaysia.
“In all these economies, GDP is lowered 1.5% or more by 2027 compared to our baseline,” Slater adds.
Exposure smaller than dot-com era That being said, Slater adds that while a downturn would be “far from negligible” the risks are more contained than the dot-com bubble.
From an equity perspective, Slater noted, there are a few possible benchmarks.
Had stocks dropped by dot-com levels in 2021-2022 they would have fallen by a third, whereas in December 2024 to April 2025, this would imply a fall of 19%.
“Finally, for valuations to reconnect with their own 10-year average would imply a fall (all else equal) of 35%.
The average of all these benchmarks suggests a fall in stocks of around 25%,” Slater continued. “Although this is much less severe than the dot-com crash … valuations look less stretched than in 2000.
And it would still be ly to inflict a severe negative economic blow, not least because U.S. households are considerably more exposed to an equity sell-off than they were 25 years ago.
“Direct and indirect equity holdings are around 250% of US disposable income, up from 180% in 2000. Fed surveys indicate that around 60% of U.S.
families own stocks, with exposure concentrated among higher income households who account for 45%-50% of consumer spending.” Fortune Global Forum returns Oct. 26–27, 2025 in Riyadh.
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