Ed Dowd: Big Downturn Coming -- "I've Never Seen Anything Like This"

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**Edward Dowd** (1:00)
What I would expect to see sometime in the next three to six months is a healthy, 20 to 30 percent pullback, scary, then a counter-trend rally, the Fed starts cutting. Then if we're in a bear market, that counter-trend rally will fail and that will go to lower lows, which I think, yeah, we're almost there. I've never seen anything like this economically.
The disconnect between the consumer and the stock prices has never been wider.

**Adam Taggart** (1:37)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. Today's guest entered the year pretty bearish on the prospects for the US economy, the global economy, the financial markets, and the housing market. Well, now that we're five months into the year and embroiled in a new war with Iran, how has his outlook changed, if at all?
For Insight, we're fortunate to welcome back to the program, Edward Dowd, founder of macroeconomic consulting and research firm, Finance Technologies. Ed, thanks so much for joining us today.

**Edward Dowd** (2:08)
Great to be here. Thanks for having me on again.

**Adam Taggart** (2:10)
Hey, it's always great, Ed. You're a wonderful interview, also just a good guy.
We were just talking before we turned the camera on here. I'm glad you made it through safely all those heavy rains and floods out there in Hawaii. We're glad you're still with us.

**Edward Dowd** (2:24)
Yeah, I'm glad I'm still here. I almost floated away in my car. I got caught in one of the flash floods, but I finally made it home during the worst of it.

**Adam Taggart** (2:35)
That sounds kind of scary.

**Edward Dowd** (2:37)
Yeah, it was kind of once in a 200-year event for Maui. I mean, it rained for a month. There were flash floods twice in a week. Wow.

**Adam Taggart** (2:49)
But things are drier now, I hope?

**Edward Dowd** (2:51)
Oh, yeah. We're back. We're on the mend.

**Adam Taggart** (2:54)
Okay. All right. Well, very glad to hear that's the case. All right. Maybe going from one disaster potentially to another, who knows? It depends on your answer.
You and I have talked a couple of times earlier this year. Heading into 2026, if I took good notes, you were projecting a mild to moderately severe economic slowdown for the remainder of 2026 Is that still the case? Or if not, how has that outlook changed?

**Edward Dowd** (3:24)
No. Well, I think when we talked, it was before the oil price. Well, we talked a couple of times, but we put out a report in January of this year.
The oil price shock only makes it worse.

**Adam Taggart** (3:38)
So forget the mild part, now it's moderate or more?

**Edward Dowd** (3:40)
It's moderate to severe.
It's confusing for people because prior to the war beginning, rates were headed lower. There was a growth scare beginning. Private credit was freezing. Payroll numbers were coming in bad. Then the war came and everybody focused over to war headlines. Then there was a nice rally, which in a couple of podcasts prior to the bottom, I said we might go to new all-time highs in the market without any kind of relief. We did. The market has gone up on a very narrow participation. It's all basically AI and AI-adjacent, semiconductor stocks had a move that we saw similar to the 2000 top 64 percent in five trading weeks.
Just unprecedented moves, very narrow participation. Where are we? The S&P 500 is 5.5 percent above the highs we put in in January or February. The actual equal-weighted S&P index is down from its highs slightly. This is very narrow participation. It's all AI. That's the only thing that's working. The real economy has gotten according to the way we measure it, it's gotten worse. Housing prices are finally starting to give up the ghost. We got some bad home price declines in February and March. I think we're waiting on April numbers. Home builders or stocks are going lower. Financial stocks are going lower. They're not participating in this rally. So once the S&P gives up the ghost, it will become apparent to everybody. We think that's sooner rather than later. There's a scare on the long bond right now. Basically, everyone says it's the end for the long bond and long-term rates, but we've seen this before.