Introduction
In early November 2025, senior executives at two major Wall Street firms sounded cautionary notes regarding the equity market’s near-term trajectory. David Solomon of Goldman Sachs and Ted Pick of Morgan Stanley both projected that markets may be due for a meaningful pullback, even as the overall trend remains upward. Their remarks mark a notable moment of introspection in an era of exuberant valuations—especially in technology and artificial-intelligence (AI) driven stocks.
What they said
Goldman Sachs’ CEO David Solomon told investors at the Global Financial Leaders’ Investment Summit in Hong Kong that:
“It’s likely there’ll be a 10 to 20 % drawdown in equity markets sometime in the next 12 to 24 months.”
He added:
“Things run, and then they pull back so people can reassess.”
He emphasised that such pullbacks are normal, even during broadly positive market cycles:
“A 10 to 15 % drawdown happens often, even through positive market cycles.”
On the Morgan Stanley side, Ted Pick echoed the view:
“We should also welcome the possibility that there would be drawdowns, 10 to 15 % drawdowns that are not driven by some sort of macro cliff effect.”
In short: both leaders are not warning of an immediate crash, but suggest a correction of moderate size (10-20 %) is probable and perhaps even healthy.
Context: Why the warning now?
To understand why these warnings are coming, it’s important to look at the broader market environment:
- Elevated valuations. The U.S. equity markets have reached record highs in 2025, driven in part by a surge in AI-related stocks and the expectation of continued interest-rate cuts. Many analysts believe valuations are “between fair and full” — i.e., not cheap, and with limited margin for error.
- Narrow market breadth and concentrated gains. The gains have been skewed toward mega-cap tech names, rather than broad-based participation. This raises the risk that if sentiment shifts, the retreat may be more abrupt for the high-flyers.
- Macro and structural uncertainties. Factors such as the extended U.S. government shutdown, shifting trade dynamics (particularly U.S.–China), and the generative-AI spending boom all add elements of risk and speculation. Solomon warned that while such things may seem distant, they could be the triggers for sentiment to shift.
- Cycle recognition. The executives’ remarks reflect a recognition that the market may be in the later stages of a bull cycle: in their view, the run-up has been substantial, and a pause or correction is part of the normal market rhythm rather than necessarily a sign of impending collapse. Solomon’s comment, “things run … then they pull back so people can reassess,” captures that cyclical mindset.
Implications: What does this mean for investors?
Their warnings carry several practical implications:
- Maintain structural allocations. Despite the call for a potential drawdown, Goldman Sachs emphasised that this doesn’t necessarily change their “fundamental, structural belief” about how to allocate capital. In other words, long-term strategies may remain intact while risk controls are more emphasised.
- Prepare for normalised volatility. A 10-15 % pullback is not catastrophic in historical terms. Recognising this possibility means investors can plan for it rather than be caught by surprise. Morgan Stanley’s view, that drawdowns are “healthy development[s]” when not driven by macro cliffs, reinforces this.
- Avoid complacency. Even in a still-bull market backdrop, the risk of sentiment reversal means that valuations, concentration of risk, and position sizing deserve increased attention. The current environment may reward caution more than aggression.
- Stay long-term oriented amid corrections. While acknowledging near-term risk, both firms reiterated the long-term growth narrative (especially around AI, global growth, Asia). The key is to stay invested with discipline rather than attempt to time a top.
Risks to the warning itself
Of course, the opinions of Solomon and Pick are not guarantees. Some caveats:
- Timing is uncertain. Predicting when a drawdown will occur is notoriously difficult. The 12-24 month horizon they mention is broad, so the correction could happen much later—or not at all if new catalysts sustain the rally.
- Fundamentals could change. Should earnings growth accelerate, interest rates fall more than expected, or a new technology boom materialise, then the correction might be delayed or limited in scope. The caution assumes valuations stay vulnerable.
- Market reaction may be self-fulfilling or self-undermining. When large institutions raise alarms, markets may react pre-emptively (which can trigger the correction sooner) or may simply shrug them off if optimism remains strong—thus limiting the impact of the warning.
Conclusion
In summary, the leaders of Goldman Sachs and Morgan Stanley are signalling what many market watchers have quietly sensed: after a strong run-up—fueled by technological disruption and low interest-rate expectations—equity markets may be due for a pause. Their message is not one of panic, but prudence: a 10–20 % drawdown over the next year or two is plausible, healthy even, and should be anticipated rather than ignored.
For investors, the takeaway is clear: view a correction not as a disaster but as a feature of the cycle; maintain long-term conviction, but reinforce risk controls; and recognise that a pause may offer an opportunity to reassess and reposition rather than simply inflate fear.
The maxim “things run and then they pull back” serves not as a headline scare, but as a reminder of market rhythm—and of the value of being prepared rather than surprised.