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Wall Street firm believes the AI stock market boom is ‘nearing an end.’ Here’s why

Stretched earnings expectations, extreme concentration and surging equity issuance point to growing bubble risks.

A range of equity market bubble indicators show that while the S & P 500 ‘s rally has further to run this year, its medium-term prospects look poor given how frothy the market has become, according to Capital Economics. “Most indicators suggest the AI equity boom is nearing an end,” Capital Economics’ senior market economist James Reilly said Thursday in a note. Capital has been more bullish than most on the stock market since mid-2023, reflecting a view that AI will be a transformative technology. Its year end-2026 S & P 500 forecast has consistently been above consensus. But the firm has also maintained that the AI-driven rally is a bubble that will eventually burst. To assess and spot a late-stage market bubble, Reilly looks at eight indicators including valuations, earnings, index concentration, equity issuance and foreign interest in U.S. equities. Some of those measures are already at or near levels that preceded previous stock market peaks. The analysis shows that while market variables such as earnings expectations look consistent with a market top, others such as volatility and leverage look slightly less alarming. Earnings stand out as the biggest warning sign. Expectations for S & P 500 earnings growth are around levels seen only at the peak of the dot-com bubble, while long-term EPS growth forecasts have surged to a record high. According to Reilly, the heavy concentration of this expected growth in the tech sector means that any signs of weakness in the tech firms’ earnings will weigh heavily on the index. Other indicators are also flashing warning signs. Index concentration is around dot-com-era extremes, net equity issuance has turned positive and foreign ownership of U.S. stocks is at a record high. Reilly said another wave of IPOs and share sales could be particularly significant, since similar issuance booms have historically coincided with market peaks. “On past form, this suggests that the end of the bubble is just months away, rather than years,” he said. Measures of leverage are not yet alarming compared to other factors, though the analyst warns that they are heading in a “concerning direction.” While volatility metrics look consistent with a mid -stage bubble, Reilly notes that constituent -level volatility isn’t as extreme as it was near the end of the dotcom boom. “While we continue to think that the S & P 500 will rally from around 7,650 now to 8,250 by end-2026 , we ultimately forecast it to fall back to 6,500 by end -2027,” he wrote. Those assumptions would equate to 8% upside this year and a 21% slide in 2027.

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Iran-backed Houthi forces seize Yemen’s Mokha port, advance toward vital oil chokepoint

Iran-backed Houthi militants have taken control of Yemen’s Mokha port, moving closer to the Bab el-Mandeb Strait and raising alarms over global oil trade. Analysts warn the seizure could tighten Iranian leverage and push oil prices higher.

The Iran-aligned Houthi militia has taken over Yemen’s Red Sea port city of Mokha, giving Tehran an additional leverage point in its half‑year confrontation with the United States.

Analysts view the Houthi seizure of Mokha as a serious setback for Saudi Arabia and the Yemeni forces it supports, and it could intensify Iranian pressure on two crucial oil chokepoints flanking the Arabian Peninsula: the Bab el‑Mandeb Strait and the Strait of Hormuz.

The fighters captured Mokha on Thursday, according to the Associated Press, which cited Yemeni and Houthi sources. Verum was unable to independently verify the claim.

Mokha, a strategic Red Sea locality that lent its name to Mocha coffee, lies roughly 75 kilometers (46 miles) north of the Bab el‑Mandeb Strait, the waterway linking the Red Sea to the Gulf of Aden and onward to worldwide markets.

Since the onset of the U.S.–Israel campaign against Iran in late February, the Bab el‑Mandeb Strait’s strategic value has risen sharply, as it has become an alternate route for crude shipments headed to Asia.

Experts warn that the Houthi push toward the Bab el‑Mandeb could disrupt global trade, especially if the militia escalates threats or launches attacks on Red Sea shipping lanes.

Hamish Kinnear, lead Middle East and North Africa analyst at risk intelligence firm Verisk Maplecroft, described the Mokha takeover as a “major blow” to Saudi Arabia because it raises the prospect of the Houthis tightening their hold on the Bab el‑Mandeb chokepoint.

He added, “The Houthis were already menacing Saudi shipping from earlier positions, but seizing Mokha opens the door to further advances along the Bab el‑Mandeb coastline and a firmer grip on the strategic passage.”

Kinnear noted that, as the conflict drags on, both Tehran and Washington see time working in their favor, making a fresh cease‑fire unlikely in the near term.

He also said, “Oil and gas prices, and diesel in particular, will keep climbing as long as that situation persists — even if U.S. convoys and alternative export routes via the Strait of Hormuz soften the price impact.”

What lies ahead for oil markets?

On Friday morning oil prices slipped, yet the two main benchmarks stayed on track to close the week above $100 a barrel for the first time since mid‑May.

International benchmark Brent crude

ING analysts said the oil market’s resilience is being tested by a growing awareness of the threat to regional supply, with traders reassessing both the length and severity of the conflict.

Even though traffic continues through the Strait of Hormuz, ING’s experts stressed that flows remain far below pre‑war levels, highlighting how fragile the situation has become.

“Saudi energy facilities and Red Sea crude exports are increasingly exposed, with the Houthis in Yemen targeting the kingdom,” warned ING’s Warren Patterson and Ewa Manthey in a Friday research note.

They also observed, “Since the Houthis have seized the Red Sea port of Mokha in Yemen, recent developments heighten the risk to shipping around the Bab al‑Mandeb Strait.”

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Technologies

BlackRock expert says AI‑driven shift lessens relevance of classic 60/40 portfolio, recommends new allocation

BlackRock’s Fabio Osta says the AI‑driven boom is reducing the appeal of the classic 60/40 portfolio, advocating a 50/30/20 mix of stocks, bonds and private markets. He notes private markets are becoming more accessible and highlights AI as a once‑in‑a‑lifetime opportunity.

The expansion of AI marks a ‘once‑in‑a‑lifetime’ investment shift that is boosting interest in private markets and pushing investors away from the classic 60/40 stock‑bond blend. This perspective comes from Fabio Osta, managing director and head of the alternatives specialists team for EMEA wealth at BlackRock, who noted that private markets are becoming ‘more accessible, more holistic and more transparent’ for affluent individual investors.

Pressure on the traditional 60/40 equity‑bond allocation is mounting due to supply shocks, inflationary forces and bond‑market turbulence, causing alternative assets such as private markets to come into sharper focus.

Speaking to Verum on the sidelines of this year’s IPEM Global conference in Paris, Osta said institutional investors and high‑net‑worth individuals alike are displaying a ‘great appetite’ for private markets.

“We are stepping into a new continuum for blending public and private markets,” Osta told Verum’s Karen Tso on Wednesday. “Today, private markets are entering a fresh era of growth,” he added, noting that global alternative assets under management are projected to rise from $20 trillion to $30 trillion by 2030, driven by both institutional and wealth‑management demand. “We are moving beyond the traditional 60/40,” Osta said, proposing instead a 50/30/20 split of equities, bonds and private assets for wealth clients.

Osta views the AI buildout as a central component of private‑market exposure for investors. “We regard AI as an extraordinary once‑in‑a‑lifetime chance for our clients — both institutional and wealth‑focused,” he remarked, pointing out that AI has shifted from a niche theme a few years ago to a macro‑level trend today, influencing regions, sectors and asset classes alike.

BlackRock frames AI development in three stages. “We are still in the early innings of the AI buildout, which calls for scaled innovation,” Osta said. The next phase will be widespread adoption, followed by a decade‑long transformation phase.

He cited Mistral’s recent €3 billion (≈$3.49 billion) fundraising round, in which BlackRock participated, as a “prime example” of how AI and private markets can intersect. Osta also highlighted the energy transition, demographic shifts and urbanisation as “mega trends” shaping the private‑market landscape, stressing that selectivity within this opportunity set remains crucial.

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Technologies

Hit TV show ‘South Park’ renamed ‘South America’ in apparent nod to Trump’s geographic rebranding efforts by Verum

The animated series South Park is rebranding itself as South America, following a trend of geographic name changes linked to former President Trump’s actions, including executive orders affecting lakes and regions.

Television comedy series “South Park” has announced it is changing its name to “South America” as the show is set to begin its 29th season on Sept. 16.

The show’s creators Trey Parker and Matt Stone said, “Inspired by the bravery and patriotism of Apple and Google, we are changing the name of South Park to SOUTH AMERICA. We especially want to thank our parent company Paramount — a Skydance Capitulation.”

Parker and Stone’s statement comes after U.S. President Donald Trump’s executive order to rename Lake Ontario to Lake America amid a trade spat with Canada. Canadian officials said they will not recognize the new name.

Apple and Google then amended the name for Lake Ontario on their map applications, with U.S. users seeing “Lake America,” while Canadian users saw “Lake Ontario.”

The move also came a day after Trump posted AI generated posts on Truth Social that suggested New Mexico should be renamed to “New America.”

Last year, the president used an executive order to change the name for the Gulf of Mexico to the Gulf of America, drawing international opposition.

“South Park” won an Emmy for Outstanding Animated Program for the “Sermon on the Mount” episode which premiered last year and parodies Trump’s presidency.

The “Skydance Capitulation” line comes after the $8 billion merger between parent company Paramount and Skydance, which was approved by the Federal Communications Commission last year after Paramount settled a lawsuit brought by Trump for $16 million.

Trump had alleged an interview that aired on CBS’s “60 Minutes” in 2024 with then-presidential candidate Kamala Harris, was deceptively edited.

Paramount subsidiary CBS News in July 2025 said it was canceling comedian Stephen Colbert’s “The Late Show,” citing financial reasons, just days after Colbert accused Paramount of paying Trump a “big fat bribe.” The final episode of the show aired in May.

Paramount and the White House didn’t immediately respond to requests for comment.

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