Goldman Sachs and Morgan Stanley Warn of Potential 20% Stock Market Decline Within Two Years

David Solomon, the CEO of , spoke at the Global Financial Leaders’ Investment Summit in Hong Kong and said that he thought global equity markets would drop by 10% to 20% in the next 12 to 24 months. 

“Things run and then they pull back, so people reassess,” Solomon said. He that corrections in the market are a typical part of long-term investing cycles. Ted Pick, the CEO of Morgan Stanley, had a similar point of view. He said that these kinds of pullbacks are “healthy” and usually not caused by significant changes in the economy.​

Gains From AI and A Positive Outlook on the Market

This year, major U.S. and Asian stock indices have hit record highs. This is because of rapid progress in artificial intelligence, hopes for interest rate decreases, and substantial corporate profits. 

The Shanghai Composite had its best week in ten years, while the S&P 500 and likewise hit new highs in the past few weeks.​ However, Wall Street officials pointed out that values may have gotten too high during this bullish trend, and history shows that a correction is likely to happen later than a robust rally.​

Corrections: Normal, Not Catastrophic

Both Solomon and Pick investors not to worry, saying that market drops of 10–15% happen all the time, even when the market is going up. Solomon told investors to stay invested and look over their portfolio allocation instead of trying to time the market. 

Pick said again that “healthy corrections” can happen even when there aren’t any large surprises, and he told investors to “welcome” periods of volatility.​ Michael Burry, who is famous for anticipating the housing collapse, also joined in the caution. He is said to have shorted major tech firms like and Palantir because he was worried about prices being too high.​

Global Risks and Macro Factors

Rising interest rates, changing central bank policies, geopolitical tensions (particularly between the U.S. and ), and sector-specific issues are all risks to the market outlook. Morgan Stanley analysts have also noted that the banking and funding markets are becoming less liquid, which may put additional stress on stocks.​

Even with these dangers, the CEOs say that the underlying narrative of economic growth, especially in , remains robust and that corrections usually don’t hinder long-term, excellent investment initiatives.​ The warnings from Goldman Sachs and Morgan Stanley indicate that people are being more cautious in the financial markets. 

Still, they also support the notion that corrections are a regular part of market cycles. Investors should reassess how their portfolios are structured and remain focused on long-term growth, recognising that even robust markets experience downturns.