David Solomon, CEO of Goldman Sachs, and Ted Pick, CEO of Morgan Stanley, have issued warnings about a potential 10-20% decline in global stock markets over the next 12 to 24 months. Speaking at the Global Financial Leaders' Investment Summit in Hong Kong, both executives described such corrections as a normal part of market cycles.
Solomon stated, "Things run and then they pull back, so people reassess," emphasizing that drawdowns of 10-15% occur frequently even during positive market trends. He advised investors to remain invested and review portfolio allocations rather than attempting to time the market.
Pick echoed this sentiment, calling potential declines "healthy corrections" that are not necessarily driven by significant economic changes. He encouraged investors to welcome periods of volatility as opportunities.
Market Context: This year, major indices like the S&P 500, Nasdaq, Shanghai Composite, and Nikkei 225 have reached record highs, fueled by advancements in artificial intelligence, expectations of interest rate cuts, and strong corporate earnings. The Shanghai Composite recently had its best week in a decade.
Additional Warnings: The International Monetary Fund, Federal Reserve Chair Jerome Powell, and Bank of England Governor Andrew Bailey have also expressed concerns about overvalued markets. Notably, Michael Burry, known for predicting the 2008 housing crash, has reportedly shorted tech giants like Nvidia and Palantir due to valuation worries.
Risks and Opportunities: Potential risks include rising interest rates, geopolitical tensions (especially U.S.-China relations), and reduced liquidity in banking markets. Despite this, both CEOs highlighted robust growth opportunities in Asia, particularly in China's AI, electric vehicle, and biotechnology sectors, as well as in Japan and India.
Solomon and Pick reassured that underlying economic narratives remain strong, and corrections do not hinder long-term investment strategies.
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