Wall Street bulls are starting to admit the earnings bubble is real—and the 60/40 portfolio may be the first casualty
Nick Lichtenberg
Mon, August 3, 2026 at 9:33 PM GMT+5:30
7 min read
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For more than four decades, the investing world operated on a foundational assumption: that a portfolio consisting of 60% stocks and 40% bonds would protect you when markets turned. For roughly the past 20 years, a second assumption took hold alongside it: that a handful of dominant tech companies would keep growing into whatever price investors were willing to pay. This has taken on several shapes, with the FAANG companies morphing into the “Magnificent Seven” during the pandemic, and the AI boom crowning a new group of “hyperscalers.”
But these assumptions are taking a hit from
Goldman Sachs, one of the Street’s most consistently bullish research shops, published a note Monday authored by chief global equity strategist Peter Oppenheimer conceding that “there does not appear to be a valuation bubble, but there may be an earnings bubble” in the technology sector
The same day, Apollo chief economist Torsten Slok wrote in his Daily Spark note that “the 60/40 portfolio is broken,” arguing that with the AI trade slowing down and government debt projected to reach 175% of GDP, “neither the 60 nor the 40 responds to what made it work in the first place.”
Both notes came after a week of Big Tech earnings that saw shockingly large moves both up and down for major tech firms, with analysts debating whether they reflected the true shape of the AI moat or “financial nihilism.”
Microsoft made history with a 17% stock surge, adding nearly $500 billion in market capitalization in one day, its largest single-day move since the financial crisis year of 2008. In fact, Oppenheimer said Monday that the market is seeing things change in a way they haven’t since the Great Recession
A regime cracking, not just a ratio
The 60/40 rule wasn’t always gospel. Its theoretical roots trace to Harry Markowitz’s 1952 work on portfolio theory, but it only became institutional orthodoxy during the four-decade stretch of falling interest rates that began in the early 1980s. That decline let bonds do double duty as both income and ballast against equities, a dynamic that market analysts have called the “golden age” of investing
Slok’s warning isn’t a reaction to one bad earnings season. He has argued since at least 2023 that rates would stay “higher for longer” than consensus expected. By late May 2026, he had sharpened that macro call into a specific yield-curve mechanism: Front-end rates were rising on sticky inflation; the middle of the curve was under pressure “because of hyperscaler issuance”; and long-end rates were climbing on “more Treasury supply and less Fed demand.” His Aug. 3 argument that “the real risk emerges if the AI trade reverses or markets become more worried about government deficits” is a continuation of that multiyear thesis, not a new one.
