THINK Ahead: Why an AI bust wouldn’t stop at tech in Stock News 07/06/2026 Why an AI bust wouldn’t stop at tech We economists aren’t exactly renowned for calling stock market crashes. Collectively, we’ve probably predicted ten of the last two bear markets, which is almost as impressive as our record on recessions… Markets may not be our patch, but the fallout from a big sell-off is. And with chatter about an AI bubble reaching fever pitch, in a week when several big tech firms have said they’re planning to raid the equity markets, it’s worth asking what happens to the economy if the whole thing starts to unravel. The obvious comparison is the dot-com bust. And it might surprise you that back then, US consumer spending barely suffered. That’s unusual for a recession, which 2001 was. Maybe that’s because the people who owned those stocks were wealthy enough not to slash spending when markets collapsed. Fed research suggests that if anything, this relationship has got even weaker over the past 25 years. Today, the top 20% of US earners own 70% of the wealth. And they hold more of their assets in equities or mutual funds than real estate. The problem is that these wealthier Americans are the only ones spending right now. The bottom 60% – who spend the same dollar amount as the top 20% – are struggling under the weight of tariffs and now pricier gasoline. If the rich pare back spending even a little bit, a key pillar of US growth falls away. Still, this is not 2008 for one very simple reason. Deep recessions usually follow a debt binge. But that’s not obviously the case today, even if leveraged retail investors have probably helped fuel the stock market boom. Household balance sheets look OK; debt service ratios are lower, while debt to GDP is at 70% just as it was in 2001. Back then, households were able to keep spending by raiding home equity release schemes and auto loans – until it all ended in tears in 2007 when debt had reached 100% of GDP. That looks harder today.