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The former Goldman Sachs strategist says markets are priced to perfection with no cushion for error as labor conditions soften
Abby Joseph Cohen has spent decades telling Wall Street what it doesn’t want to hear, usually at exactly the right time. The former Goldman Sachs chief US investment strategist, now a professor at Columbia Business School, is doing it again.
In a June 26 interview with Bloomberg TV, Cohen laid out a case that should make growth-stock enthusiasts uncomfortable: US equities are priced to perfection, the labor market is softening, and consumer spending patterns are flashing warning signs about the broader economy.
A market with no room for mistakes #
When she says investors have “no cushion for error,” she’s pointing to a specific dynamic. In a fully priced market, even a modest earnings miss can trigger outsized sell-offs because there’s no valuation discount already baked in to absorb bad news.
The softening labor conditions Cohen flagged aren’t necessarily a recession signal. Workers who feel less secure about their jobs tend to pull back on discretionary purchases first. That ripples through retail, services, and eventually into the earnings reports that equity analysts obsess over.
The AI trade shows cracks #
Back in January 2026, Cohen flagged a potential slowdown in growth for AI-related stocks. That warning came while the sector was still riding high, fueled by massive capital expenditure commitments from hyperscalers.
Her concern isn’t that AI is overhyped as a technology. It’s that the investment cycle may be running ahead of the revenue cycle. Companies are pouring billions into AI infrastructure, but the monetization pathways remain uneven across the sector.
AI-adjacent stocks have been instrumental in pushing major indices higher, meaning any rotation out of the sector wouldn’t just affect a handful of names. It would ripple through index-level performance and potentially drag passive investors along for the ride.
From pandemic inequality to tariff headwinds #
During 2024 and 2025, her commentary focused heavily on pandemic-driven income inequality and the market uncertainty created by tariff policies. Both themes addressed structural vulnerabilities in the economy that could undermine the growth assumptions embedded in stock prices.
Cohen joined Goldman Sachs in 1990 and spent over three decades there before retiring in 2021. Her tenure spanned the dot-com bubble, the financial crisis, and the pandemic crash.
What investors should actually do with this #
Cohen maintains a long-term positive outlook on US equities, which suggests her concerns are more about near-term positioning than a fundamental loss of faith in American corporate earnings power.
The AI investment sustainability question carries its own set of implications. The companies best positioned to weather any deceleration will be those already generating meaningful revenue from AI deployments, not the ones still running on promises and projected total addressable markets.
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