Goldman Sachs, Morgan Stanley CEOs predict big stock market correction

Core Viewpoint - Wall Street leaders anticipate a potential market correction after recent highs, with predictions of a 10 to 20% drawdown in equity markets within the next 12 to 24 months [2] Group 1: Market Performance and Predictions - Global equity markets have reached record highs this year, driven by investments in artificial intelligence-linked stocks and favorable rate-cutting cycles [1] - The S&P 500, Dow Jones, and Nasdaq have all achieved record levels, alongside major indices in Japan, South Korea, and Europe [1] - Goldman Sachs CEO David Solomon emphasizes that market pullbacks are normal and necessary for reassessment, noting that a 10 to 15% drawdown is common even in positive cycles [2] Group 2: Investor Sentiment and Valuations - Morgan Stanley CEO Ted Pick suggests that investors should welcome potential drawdowns, viewing them as healthy if not caused by macroeconomic crises [2] - Capital Group's Mike Gitlin highlights that while corporate earnings remain strong, current valuations are challenging, indicating that stocks are perceived as being between fair and full rather than cheap [2] Group 3: Economic Context and Concerns - The International Monetary Fund has raised alarms about the similarities between current AI-related spending and the 1990s dot-com boom, suggesting potential overvaluation risks [3] - IMF's Pierre-Olivier Gourinchas notes that while the surge in valuations and investment supports U.S. economic growth, the possibility of a market correction remains uncertain [4]