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August 03, 2026
Partner, Chief Economist
The 60/40 portfolio is broken because equity returns are driven by AI concentration rather than the business cycle, while bond returns are now driven by fiscal constraints rather than cycle dynamics.
With the AI trade slowing down and government debt projected to reach 175% of GDP (see chart below), neither the 60 nor the 40 responds to what made it work in the first place.
The bottom line is that the 60/40 portfolio has lost its diversification benefit, with fundamental implications for asset allocation.
The real risk emerges if the AI trade reverses or markets become more worried about government deficits. In either scenario, both stocks and bonds would face pressure simultaneously, leaving investors with no hedge.
Sources: US Congressional Budget Office, Macrobond, Apollo Chief Economist
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