Tom Essaye Warns of “Horror-Movie” Market Scenario if AI Bubble and Consumer Stress Collide
Essaye cautions that a deflating AI bubble, weakening consumers, and a softening labor market could trigger a 30% S&P 500 drop.
Three scenarios that could spook stocks in October, according to a Wall Street veteran
Tom Essaye, founder of Sevens Report Research, warns that the stock market could face a “horror-movie scenario” if three key risks hit at once — an AI bubble burst, worsening consumer strain, and a weakening labor market. He points to OpenAI’s $500 billion valuation and stretched tech prices as signs of speculative excess. Meanwhile, rising delinquencies at companies like CarMax show lower-income consumers are increasingly pressured.
Essaye cautions that while the economy still looks stable on the surface, markets are ignoring the potential for rising unemployment and slowing growth. If AI optimism fades and consumer spending weakens, the S&P 500 could fall 20–30%, mirroring the drawn-out collapse of the early 2000s tech bubble.
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