Goldman Sachs and Morgan Stanley Warn of Potential Global Stock Market Correction in Next Two Years, But Maintain Long-Term Bullish Outlook

Deep News11-04

Goldman Sachs and Morgan Stanley warned investors on Tuesday that global stock markets could face a pullback in the next two years following this year's strong rally.

Driven by AI-related earnings and expectations of interest rate cuts, global equities have surged to record highs this year. Over the past month, major U.S. stock indices repeatedly hit new peaks, while Japan's Nikkei 225 and South Korea's Kospi also reached all-time highs.

David Solomon, CEO of Goldman Sachs, stated at the Global Financial Leaders' Investment Summit in Hong Kong: "At some point in the next 12 to 24 months, the stock market could decline by 10% to 20%. Stocks rise sharply, then they pull back, allowing investors to reassess."

However, Solomon emphasized that such a reversal is a normal feature of a long-term bull market. He noted that Goldman Sachs' consistent advice to clients remains to stay invested and review portfolio allocations rather than attempting to time the market.

He added: "Even in strong market cycles, 10% to 15% corrections frequently occur. This doesn’t change your fundamental, structural beliefs about capital allocation."

Morgan Stanley CEO Ted Pick, speaking at the same panel, suggested that investors should welcome cyclical corrections, describing them as healthy developments rather than signs of crisis.

He said: "We should also welcome the possibility of a correction—a 10% to 15% pullback not driven by some macro cliff effect."

These remarks follow recent warnings from the IMF about a potential sharp market correction, as well as cautionary statements from Federal Reserve Chair Jerome Powell and Bank of England Governor Andrew Bailey regarding overvalued equities.

Goldman Sachs and Morgan Stanley highlighted Asia as a bright spot in the coming years amid easing trade tensions. Goldman Sachs expects global capital allocators to remain interested in China, noting that it remains one of the world's "largest and most important economies."

Morgan Stanley’s Ted Pick also reiterated optimism for mainland China, Hong Kong, Japan, and India due to their unique growth narratives. Japan’s corporate governance reforms and India’s infrastructure development were cited as multi-year investment themes.

He specifically emphasized China’s AI, electric vehicle, and biotechnology sectors.

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Comments

neo26000
11-04
neo26000
Oh wow, stop the presses — markets sometimes go up and then come down? Incredible insight! Truly groundbreaking stuff from the financial titans. If only my overpriced business school had included “Buy high, regret later” in the syllabus, I might’ve graduated summa cum laude in Obvious Economics. Guess we were too busy memorizing CAPM formulas to learn that things that “run” can, in fact, “pull back.” Who could’ve seen that coming?