{"id":13711,"date":"2026-08-03T18:49:16","date_gmt":"2026-08-03T18:49:16","guid":{"rendered":"https:\/\/nile1.com\/en\/?p=13711"},"modified":"2026-08-03T18:49:24","modified_gmt":"2026-08-03T18:49:24","slug":"wall-street-giants-warn-60-40-portfolio-is-broken-as-goldman-fears-tech-earnings-bubble","status":"publish","type":"post","link":"https:\/\/nile1.com\/en\/2026\/08\/03\/wall-street-giants-warn-60-40-portfolio-is-broken-as-goldman-fears-tech-earnings-bubble\/","title":{"rendered":"Wall Street Giants Warn 60\/40 Portfolio Is ‘Broken’ as Goldman Fears Tech ‘Earnings Bubble’"},"content":{"rendered":"

Two of Wall Street\u2019s most prominent financial institutions have issued a dual warning that the foundational playbooks of modern investing are fracturing. On Monday, research notes from Goldman Sachs<\/a> and Apollo Global Management declared that the traditional 60\/40 investment portfolio is no longer viable and that the technology sector may be trapped in a dangerous “earnings bubble.”<\/p>\n

Apollo chief economist Torsten Slok<\/a> delivered a stark assessment of the classic balanced strategy, stating that “the 60\/40 portfolio is broken.” The strategy, which allocates 60% of assets to equities for growth and 40% to bonds for safety, has served as institutional orthodoxy since the early 1980s. Historically, falling interest rates allowed bonds to act as both a reliable source of income and a buffer against stock market volatility. However, with government debt projected to reach 175% of GDP and the artificial intelligence market cooling, Slok argued that “neither the 60 nor the 40 responds to what made it work in the first place.” This warning comes after the strategy suffered one of its worst years in modern history in 2022, when aggressive Federal Reserve interest rate hikes caused both stocks and bonds to plummet in tandem, stripping investors of their traditional hedge.<\/p>\n

Simultaneously, Goldman Sachs chief global equity strategist Peter Oppenheimer conceded that while there is no valuation bubble in tech, “there may be an earnings bubble.” This shift is already driving a market rotation not seen since the aftermath of the 2008 financial crisis. For the first time since 2009, the S&P 500<\/a> Equal-Weighted Index<\/a> has outperformed the traditional market-cap-weighted index by more than 7.3%. This suggests that market participation is finally broadening beyond a handful of dominant mega-cap tech stocks, spurred by a resilient broader economy, rising mergers and acquisitions, and a sharp momentum unwind in the technology sector.<\/p>\n

A primary driver of this transition is the aggressive capital expenditure of “hyperscalers<\/a>“\u2014the massive cloud infrastructure providers like Microsoft, Amazon, and Alphabet that are building out AI networks. Since the launch of ChatGPT, these companies have poured tens of billions of dollars into AI infrastructure. Oppenheimer noted that this massive spending has eroded their premium cash flows, forcing them to turn to debt and equity markets for fresh funding. Consequently, the premium that the five largest U.S. stocks once commanded over the remaining 495 stocks in the S&P 500 has almost vanished, which Goldman characterized as a healthy normalization of market concentration.<\/p>\n

Warnings of an earnings-driven bubble have been building for months. In June, Owen Lamont of Acadian Asset Management pointed out that expected long-term S&P 500 earnings growth had climbed to 20.2%, eclipsing the 18.6% peak recorded during the dot-com bubble in 2000. JPMorgan Chase CEO Jamie Dimon also cautioned that $10 trillion to $12 trillion in deficit spending has mechanically inflated corporate profits, warning that markets are treating a temporary “sugar high” as sustainable organic strength. Similarly, billionaire investor Ray Dalio noted that his proprietary bubble indicators were climbing close to levels observed in 2000 and 1929.<\/p>\n

The danger of an earnings bubble became clear on July 14, when tech pioneer IBM suffered its worst single-day stock crash in its 115-year history. IBM shares plummeted 25%, wiping out roughly $40 billion in market value, following a revenue miss of just 3.7%. Economist Steve Hanke pointed to the event as proof of an earnings bubble, explaining that while valuation metrics like the CAPE Shiller index\u2014which measures stock prices against average real earnings over ten years\u2014show visible inflation, the more insidious risk lies in the earnings figures themselves. Peter Berezin of BCA Research echoed this, noting that earnings bubbles are notoriously difficult to detect because analysts typically only downgrade corporate profit estimates after stock prices have already collapsed.<\/p>\n

The market’s patience with heavy AI investment showed clear signs of exhaustion during the earnings week of July 26-31. Investors sharply differentiated between the top five AI spenders based on their capital expenditure credibility rather than raw earnings. Microsoft and Amazon shares climbed 18% and 10% respectively, while Alphabet dipped 4% and Meta dropped nearly 10%, despite all companies posting strong overall revenues. Investors are increasingly demanding clear evidence of returns on massive capital expenditures, leaving the tech sector’s high-flying valuations exposed to shifting balance-sheet realities.<\/p>\n

\n

Read also:<\/h3>\n