Wall Street giants warn of a 10–20% pullback after record-breaking AI-fueled rally, but see Asia as the next growth frontier.
HONG KONG — The world’s longest-running market rally may be nearing its peak. In a rare note of caution, Goldman Sachs and Morgan Stanley warned on Tuesday that global equities are likely to face a significant correction within the next two years, following months of record-breaking gains driven by AI optimism and rate-cut expectations.
Speaking at the Global Financial Leaders’ Investment Summit in Hong Kong, Goldman Sachs CEO David Solomon said investors should prepare for a 10–20% drawdown in global equity markets over the next 12 to 24 months. “Things run, and then they pull back so people can reassess,” Solomon said, adding that such reversals are “a normal feature of long-term bull markets.”
Despite the warning, Solomon urged clients not to panic or attempt to time the market. “A 10–15% drawdown happens often, even during positive cycles. It’s not something that changes your structural belief in capital allocation,” he said.
Morgan Stanley CEO Ted Pick echoed the sentiment, describing corrections as “healthy developments” that restore balance to overheated markets. “We should welcome the possibility of 10–15% drawdowns that aren’t driven by some macro cliff effect,” Pick noted.
The remarks come amid growing concerns from global institutions. Both the IMF and central bankers including Jerome Powell and Andrew Bailey have cautioned that stock valuations may be stretched after an unprecedented year of gains across U.S., European, and Asian markets.
Still, both banks see Asia as a powerful counterweight to global slowdown fears. Goldman Sachs pointed to the region’s expanding influence, underpinned by the recent U.S.–China trade thaw and resilient capital flows. “China remains one of the largest and most important economies in the world,” Solomon said.
Morgan Stanley highlighted Hong Kong, China, Japan, and India as standout markets with unique growth narratives — from Japan’s corporate governance reforms to India’s massive infrastructure buildout and China’s AI, EV, and biotech ambitions. “It’s hard not to be excited about these markets — different stories, but all part of a global Asia resurgence,” Pick said.
For investors, the message is twofold: brace for turbulence, but don’t abandon the bull run. As Wall Street’s top strategists remind, the next great opportunity may arise not from avoiding the correction — but from positioning smartly within it.
