On Tuesday, November 4 2025, two of Wall Street’s most powerful voices sent a shock wave through global financial markets. At the Global Financial Leaders’ Investment Summit in Hong Kong, David Solomon, Chief Executive of Goldman Sachs, and Ted Pick, CEO of Morgan Stanley, cautioned investors to brace for a potential market pullback. Solomon estimated a possible 10-20% drawdown in equities within the next 12 to 24 months; Pick characterized shorter-term declines of 10-15% as “healthy” corrections in a long bull cycle.
Their warnings come at a time when equity benchmarks in the U.S. are near all-time highs. Markets have surged this year on the back of enthusiasm for generative artificial-intelligence, rate-cut hopes, and strong corporate earnings. At the same time, the broader sentiment is becoming more cautious: investors are questioning whether current valuations remain sustainable. At the summit, Solomon said flatly: “Things run, and then they pull back so people can reassess.”
Markets responded swiftly. On the same trading day, U.S. futures slid and the broad tech sector led losses: the Nasdaq 100 fell more than 1.3 %, while the S&P 500 dropped around 0.7 %. The Dow Jones Industrial Average also moved lower. Tech names bearing high valuations, such as Palantir Technologies, declined significantly despite strong revenue guidance-underscoring investor caution.
What lies behind the caution?
Several key factors underpin the warnings:
- Rich valuations + concentration risk: Many large-cap tech stocks have driven index gains, but both CEOs flagged the possibility that high valuations leave markets vulnerable to shifts in sentiment or earnings disappointments. Solomon linked current conditions to past bubbles, noting parallels with the late-1990s dot-com era.
- Policy and macro uncertainties: Despite strong recent earnings, broader questions remain around how long favourable conditions will last. The U.S. government shutdown, inflation dynamics, and central-bank policy ambiguity all create potential triggers for reversal.
- Over-reliance on narrow themes: The AI-driven rally has been particularly strong, but some analysts worry that earnings and business models may struggle to keep up with investor expectations—and that could prompt a re-valuation. Both Pick and Solomon emphasised that drawdowns can occur even absent a “macro cliff”.
Implications for investors and markets
- A pullback of 10–20% would not mark the end of the bull market, but it could shift the tone of the cycle-heightening volatility, increasing dispersion across sectors, and rewarding stock-specific fundamentals more than broad index momentum.
- Equity portfolio positioning may lean more defensive: sectors less tied to high-growth expectations (such as value, income, and dividend-focused equities) could gain favour.
- For tech-heavy indices, this is a reminder that valuations must be matched by execution. Premium multiples may no longer be as easily justified, especially if interest-rate expectations or growth trajectories change.
- Global spill-over: Although the comments originated in the U.S., markets in Asia and Europe are already reflecting the caution. This signals that sentiment may shift globally, not just domestically.
- Long-term investors should note that both CEOs stressed this is part of a normal cycle. Solomon said a 10–15% drawdown “happens often, even through positive market cycles.” Pick suggested such corrections should be embraced rather than feared.
- We have also seen a major decline in the valuation of crypto Assets such as Bitcoin and Etherium.
What to Monitor Next
- Upcoming earnings from tech and growth names: weaker than expected results may act as triggers.
- Central-bank commentary and inflation data: any surprise in either direction may accelerate a shift in valuations.
- Market breadth and rotation: signs that investors are moving out of leaders into laggards may indicate a broader change in regime.
- Sentiment indicators: the rise in the VIX and other fear gauges reflect heightened nervousness. Solomon has warned that “any little piece of news” could change sentiment.
Conclusion
The caution from Goldman Sachs and Morgan Stanley represents a notable shift in tone from previously bullish commentary. While the fundamentals of many companies remain intact, the risk environment has clearly moved. Investors could view a correction not as a crisis but as a pause-an opportunity to reassess and rebalance portfolios. The market remains elevated, and as both CEOs highlighted, corrections are part of the cycle even during strong campaigns. The path forward may now hinge less on earnings growth alone and more on execution, policy certainty, and managing expectations.