Chief executives from Wall Street giants Morgan Stanley and Goldman Sachs have expressed concerns about a potential market drawdown, citing elevated equity valuations. Their warnings come as the S&P 500 continues its record-breaking climb, sparking comparisons to the dot-com boom. Morgan Stanley CEO Ted Pick suggested that a 10% to 15% drawdown, not driven by a major macro event, would be a healthy market correction. Goldman Sachs CEO David Solomon echoed this sentiment, noting that shifts in sentiment and growth perspectives can trigger drawdowns unexpectedly. Goldman Sachs is a leading global investment banking, securities, and investment management firm. Morgan Stanley provides global financial services, including investment banking, wealth management, and trading.
Despite persistent concerns about inflation, high interest rates, and geopolitical uncertainty, markets have largely remained unaffected. Solomon acknowledged that technology multiples appear full, though he believes this isn’t necessarily true across the broader market. Positioning a pullback as healthy also underscores the degree of exuberance in markets.
These concerns align with earlier warnings from JPMorgan Chase CEO Jamie Dimon, who cautioned about a heightened risk of a significant market correction within the next two years. Dimon highlighted geopolitical tensions, fiscal spending, and global remilitarisation as key risk factors. Bridgewater Associates’ co-chief investment officers have also warned that investors are overlooking mounting risks.
The surge in enthusiasm for generative AI has further fueled bubble concerns, reminiscent of the dot-com era. Hedge fund manager Michael Burry, known for predicting the 2008 financial crisis, recently alluded to potential market excesses on social media. Despite these concerns, some analysts argue that the current AI boom differs from the dot-com bubble due to the solid earnings and business performance of leading AI companies.
