Goldman Sachs and Morgan Stanley CEOs jointly issued a warning: U.S. stock valuations are too high, and a correction of at least 10% may occur!

Top executives from Wall Street's leading investment banks have issued a warning that despite strong corporate earnings, the current valuation levels are concerning, and a correction of over 10% may occur within the next 12 to 24 months.

On November 4th, according to media reports, Morgan Stanley CEO Ted Pick and Goldman Sachs CEO David Solomon both expressed concerns about the current valuation levels of U.S. stocks at a financial summit organized by the Hong Kong Monetary Authority, suggesting that a significant market sell-off may happen in the near future.

Goldman Sachs believes that the stock market could experience a correction of 10% to 20% within the next 12 to 24 months. Morgan Stanley stated that a 10% to 15% correction not driven by some macro cliff effect would be welcome. Both executives emphasized that corrections are a normal feature of market cycles, and investors should view them as a healthy development.

Meanwhile, Mike Gitlin, President and CEO of Capital Group, also expressed a similar view, stating that "corporate earnings are strong, but valuation levels are challenging." He pointed out that most investors believe market valuations are between reasonable and full, with few considering stock prices to be cheap. Citadel CEO Ken Griffin noted that the market is most irrational at the peak of a bull market and the bottom of a bear market, and "we are currently deep in a bull market."

Despite concerns about U.S. stock valuations, both Goldman Sachs and Morgan Stanley remain optimistic about the outlook for Asian markets.

High Valuation Levels Raise Concerns

Goldman Sachs' Solomon pointed out that "tech stock valuations are already full," but this situation does not apply to the entire market.

Morgan Stanley's Pick mentioned that the market has come a long way, but there are still "risks of policy missteps" and geopolitical uncertainties in the U.S.

Capital Group's Gitlin candidly highlighted the core issues facing the current market. When asked whether stocks are cheap, reasonable, or fully valued, he stated:

Most people believe we are between reasonable and full, but I think very few would say we are between cheap and reasonable.

Corrections Viewed as Healthy Adjustments

Wall Street executives unanimously agree that market corrections should be viewed as a normal and healthy development, rather than a crisis signal.

Goldman Sachs' Solomon emphasized that even in positive market cycles, 10% to 15% corrections often occur and do not change the fundamental structural judgments of capital allocation.

He explained that the market tends to rise first and then correct, allowing investors to reassess, which is a normal feature of a long-term bull market.

Morgan Stanley's Pick stated that investors should welcome the possibility of cyclical corrections, calling them a healthy development rather than a sign of crisis.

We should also welcome the possibility of a 10% to 15% correction that is not driven by some macro cliff effect.

Reportedly, these views from Wall Street's top executives echo recent warnings from the International Monetary Fund, which cautioned about the potential for a sharp adjustment. Notably, Federal Reserve Chairman Jerome Powell and Bank of England Governor Andrew Bailey have also previously warned about excessively high stock valuations

Positive Outlook for Asian Markets

Despite concerns about the valuation of U.S. stocks, both Goldman Sachs and Morgan Stanley remain optimistic about the prospects for Asian markets.

Goldman Sachs expects that, based on recent developments including positive progress in trade relations, 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 maintains a bullish outlook on markets such as China, Japan, and India, believing that these markets have unique growth stories. Pick stated:

"It's hard not to be excited about China, Japan, and India—three distinctly different narratives, but all part of the global Asian story."

Pick specifically highlighted the investment opportunities in China's artificial intelligence, electric vehicles, and biotechnology sectors, and also mentioned Japan's corporate governance reforms and India's infrastructure development, referring to them as multi-year investment themes