Economist Tuomas Malinen, a professor at the University of Helsinki and CEO of GnS Economics, believes the United States may be approaching a major debt reckoning, with the potential for a recession emerging by the end of 2026 or early 2027.
Malinen, who specializes in financial crises and geopolitics, argues that excessive leverage across the U.S. financial system, including corporate debt and investor margin borrowing, could become the trigger for a significant downturn.
A Potential Recession Driven by Leverage
According to Malinen, the next recession could resemble the market turmoil seen during the early stages of the COVID-19 pandemic, when sharp declines in asset prices forced the Federal Reserve to intervene and stabilize financial markets.
He argues that the current financial system is highly leveraged and has not yet experienced a recession capable of exposing weaknesses created by excessive borrowing and poor investment decisions.
“Our extremely leveraged financial system has never faced a recession rooting out both financial and economic mal-investments,” Malinen wrote, warning that markets and policymakers could eventually face a major stress event.
A New Wave of Financial Crisis
Malinen’s recession forecast is part of his broader view that the global economy is experiencing a new financial crisis developing through multiple waves affecting different regions at different times.
The first wave occurred in 2022, when the Bank of England intervened in the bond market after a sharp sell-off triggered by concerns about the United Kingdom’s fiscal outlook. The turmoil severely affected leveraged liability-driven investment funds within the country’s pension system.
The second wave emerged in early 2023 during the regional banking crisis that led to the collapse of Silicon Valley Bank and Signature Bank.
Malinen believes another market disruption could emerge as leverage risks continue building within the U.S. financial system.
Growing Leverage Across Markets
Several indicators have raised concerns among some analysts about financial vulnerabilities. Hedge fund leverage reached record levels in late 2025, according to the Federal Reserve’s financial stability report.
At the same time, major technology companies are increasing borrowing and investment to expand artificial intelligence infrastructure. Alphabet, Microsoft, Meta, and Amazon have committed more than $700 billion in capital spending this year, much of it focused on AI-related projects.
Government debt has also continued rising. Malinen cited World Bank data showing that the central banks of Japan, the European Union, China, and the United States expanded their combined balance sheets by approximately $24 trillion over the 15 years leading up to 2023.
The Risk of a Third Financial Shock
Malinen argues that the global economy has avoided a traditional recession during a period of extraordinary liquidity expansion, aside from the short and heavily supported downturn in 2020.
He believes that if a recession is triggered by another leverage event, it could represent a third wave of the broader financial crisis, potentially arriving during the first half of 2027.
“Near-term developments will determine the course of events, but we look to be very close to the onset of another financial calamity,” he wrote.
A Minority View on Wall Street
Malinen’s outlook remains outside the mainstream view among many Wall Street analysts, who continue to raise year-end targets for the S&P 500 and expect artificial intelligence investment to support economic growth and market performance.
However, he maintains that warning signs are already visible, including rising corporate bankruptcies, increasing corporate bond yields, and growing levels of financial leverage.
