Goldman Sachs & Morgan Stanley Warn of 10–20% Market Correction: Key Risks Ahead

In recent public remarks made at the Global Financial Leaders’ Investment Summit in Hong Kong, Goldman Sachs’ CEO David Solomon and Morgan Stanley’s CEO Ted Pick delivered bearish views on equity markets, forecasting significant potential drawdowns over the next one to two years. Solomon expects a 10%–20% stock market correction between now and late 2026; Pick agrees that a 10%–15% drop is “likely” in the nearer term. [1][6]

These forecasts are grounded in observable signals: valuations—especially in technology—are stretched; investor sentiment has grown increasingly exuberant amid the AI boom; and macro and policy uncertainty (inflation, interest rates, trade, and government shutdowns) adds risk. Solomon parallels the current AI excitement to the tech bubble of the late 1990s/early 2000s. [3][6][4]

Immediate market reaction to these warnings was sharp: markets across Asia and Europe, plus S&P 500 futures, fell cynically as investors rebalanced expectations. Tech names were hit hardest—speculative, small-cap, or unprofitable firms saw the most damage, while consumer defensive stocks gained some relative appeal. [1][7]

Strategic implications for institutional investors, portfolio managers, and corporate treasuries include heightened vigilance around portfolio risk from speculative assets, increased preference for defensive positioning, floored valuation multiple sensitivity, and a possibility that near-term volatility may disrupt earnings expectations and raise cost of capital. Open questions remain around the triggers that would spark a drawdown—e.g. fed policy pivots, earnings disappointments, or liquidity constraints—and how severe or prolonged such corrections might be relative to previous cycles.

This outlook is balanced by the executives’ still-positive long-term view on AI and transformative technologies; Solomon acknowledged excitement for the future despite caution over shorter-term excesses. [3]