Global stock markets, after a year of strong growth, may soon face a reality check. The CEOs of Goldman Sachs and Morgan Stanley have warned that the market could experience a significant correction in the next one to two years.
On Tuesday, November 4th, at the Financial Leaders’ Investment Summit in Hong Kong, Goldman Sachs CEO David Solomon said, “In the next 12 to 24 months, the stock market is likely to experience a 10% to 20% pullback.”
He added that a 10% to 15% pullback often occurs, even during upward cycles. “After a market rally, there is always a pullback for people to reassess,” he said, emphasizing that this should not affect investors’ “fundamental” or “structural” judgments on capital allocation.
Solomon’s warning comes at a time when the U.S. stock market is hitting new highs. In April of this year, global stock markets tumbled after U.S. President Donald Trump announced the “Liberation Day” tariff policy. However, the market rebounded strongly later due to the AI boom and expectations of Fed rate cuts. U.S. tech giants led the way, with the S&P 500 and Nasdaq hitting new highs. Last week, Apple surpassed a market value of $4 trillion, while Nvidia hit a milestone with a market value exceeding $5 trillion, becoming the first company in history to reach this benchmark.
Morgan Stanley CEO Ted Pick stated that although current stock prices may seem high, “systematic risks may have diminished.”
He believes that if there is a 10% to 15% pullback in the market, “it may not be a bad thing, but rather a healthy development trend, as it is not triggered by a cliff-like macroeconomic impact.”
Some analysts have expressed concerns about the overvaluation of the stock market as it continues to hit new highs.
Mike Gitlin, President and CEO of Capital Group, mentioned that while corporate profits are strong, stock valuations are “quite challenging.” He said, “Current prices are between reasonable and overly high, and few would argue that current stock prices are undervalued or at a reasonable level.”
Some analysts caution that with the stock market repeatedly hitting new highs and valuations deviating from fundamentals, investors should remain vigilant against potential volatility. The statements made by senior officials at Goldman Sachs and Morgan Stanley are also seen as a reminder of the current “overly optimistic” sentiment being prevalent in the market.