Earnings Bubble Looms as Tech Giants' Dominance Fades

Wall Street's bulls are starting to admit that the earnings bubble may be real. The assumption that a portfolio consisting of 60% stocks and 40% bonds would protect investors when markets turned has been widely accepted for decades.

However, Goldman Sachs' chief global equity strategist Peter Oppenheimer conceded in a note that 'there does not appear to be a valuation bubble, but there may be an earnings bubble' in the technology sector. Apollo's chief economist Torsten Slok also warned that the 60/40 portfolio is broken due to the AI trade slowing down and government debt projected to reach 175% of GDP.

Recent Big Tech earnings have seen shockingly large moves, with Microsoft making history with a 17% stock surge, adding nearly $500 billion in market capitalization in one day. Oppenheimer noted that this is a regime cracking, not just a ratio change.