Goldman Sachs and Morgan Stanley Warn: U.S. Stocks Are Overvalued and Could Face at Least a 10% Pullback!

Top executives from leading Wall Street investment banks are warning simultaneously that, despite strong corporate earnings, current US stock valuations are concerning and may lead to a decline of over 10% within the next 12 to 24 months. This article is sourced from Wall Street Insights, compiled and written by Foresight News. (Background: The three major US stock indices hit all-time highs! AMD surged 7.6%, Coinbase and Circle rose over 9%) (Additional context: First time since 1996! The “Fear Index” signals that the calm period in US stocks may be ending.)

Top Wall Street investment bank executives are warning simultaneously that, despite strong corporate earnings, current valuation levels are concerning and may result in a decline of more than 10% within the next 12 to 24 months. On November 4, media reports indicated that Morgan Stanley CEO Ted Pick and Goldman Sachs CEO David Solomon both expressed concerns at a financial summit organized by the Hong Kong Monetary Authority, stating that US stock valuations are worrisome and that the market could experience significant sell-offs in the near future.

Goldman Sachs believes the stock market could see a 10% to 20% correction in the next 12 to 24 months. Morgan Stanley, on the other hand, considers a 10% to 15% correction driven not by some macro cliff effect but as a welcome market adjustment. Both executives emphasized that corrections are normal features of market cycles and should be viewed as healthy developments.

Meanwhile, Capital Group President and CEO Mike Gitlin also shared similar views, stating that “corporate earnings are strong, but valuations are challenging.” He noted that most investors see market valuations as being between reasonable and fully valued, with few considering stocks cheap. Citadel CEO Ken Griffin pointed out that markets tend to be most irrational at bull market peaks and bear market bottoms, and “we are now in the depths of a bull run.”

Despite concerns about US stock valuations, Goldman Sachs and Morgan Stanley remain optimistic about the prospects for Asian markets.

Concerns Over High Valuations: Goldman Sachs’s Solomon noted, “Tech stock valuations are already fully valued,” but this does not apply to the entire market. Morgan Stanley’s Pick mentioned that the market has come a long way, but there are still “policy error risks” and geopolitical uncertainties in the US. Gitlin from Capital Group bluntly pointed out the core issues facing the current market. When asked whether stocks are cheap, reasonable, or fully valued, he responded: “Most people think we are between reasonable and fully valued, but I believe few would say we are between cheap and reasonable.”

Corrections Are Seen as Healthy Adjustments: Wall Street executives unanimously agree that market corrections should be viewed as normal and healthy developments, not signals of crisis. Goldman Sachs’s Solomon emphasized that even during active bull runs, 10% to 15% corrections happen frequently and do not alter the fundamental structural judgment of capital allocation. He explained that markets tend to rise first and then correct, providing investors with opportunities to reassess—this pattern is a normal feature of long-term bull markets. Morgan Stanley’s Pick stated that investors should welcome the possibility of cyclical corrections, viewing them as healthy developments rather than signs of crisis. We should also welcome the potential for 10% to 15% corrections, which are not driven by some macro cliff effect.

According to reports, these views from top Wall Street CEOs have been echoed by recent warnings from the International Monetary Fund, which cautioned about the possibility of sharp adjustments. Notably, Federal Reserve Chair Jerome Powell and Bank of England Governor Andrew Bailey have previously issued warnings about overvalued stocks.

Positive Outlook for Asian Markets: Despite concerns over US stock valuations, Goldman Sachs and Morgan Stanley remain optimistic about Asian markets. Goldman Sachs expects that, based on recent developments including positive trade progress, global capital allocators will continue to show interest in China. Solomon pointed out that China is one of the “largest and most important economies” in the world. Morgan Stanley remains bullish on markets like China, Japan, and India, believing these markets have unique growth stories. Pick stated, “It’s hard not to be excited about China, Japan, and India—three very different narratives, but all part of the broader Asian story.” He particularly highlighted investment opportunities in China’s artificial intelligence, electric vehicles, and biotech sectors, as well as Japan’s corporate governance reforms and India’s infrastructure development, calling them long-term investment themes.

Related Reports:

• “Crypto whales buy the dip” notes that US stocks may rebound next week, but market optimism and pessimism still coexist.
• Nomura Securities: The US stock bull run remains supported by AI narratives, but risks should not be ignored.
• BitGo files for an IPO of US stocks with the SEC, with revenue exceeding $4.19 billion in the first half of 2025.
• Goldman Sachs and Morgan Stanley warn: US stock valuations are too high and may face at least a 10% correction.

This article was first published on BlockTempo, the most influential blockchain news media.