The heads of Goldman Sachs and Morgan Stanley are warning of an impending market correction of up to 20 percent. However, they are not worried.
• CEOs of Goldman Sachs and Morgan Stanley expect stock market correction within 24 months
• Upcoming correction as a healthy setback
• Goldman boss warns investors against panic reactions
At this year’s “Global Financial Leaders’ Investment Summit” in Hong Kong, several financial leaders struck an unusually cautious tone. According to CNBC, the CEOs of Goldman Sachs and Morgan Stanley urged investors to be more realistic and prepare for a significant market decline. After months of strong price gains on the global stock markets, the heads of both companies see signs of an impending market correction of up to 20 percent.
Goldman Sachs: Correction as a natural part of the cycle
David Solomon, CEO of Goldman Sachs, warned at the meeting in Hong Kong in early November that there would likely be a “drawdown period” within the next two years, according to CNBC. “It is likely that equity markets will experience a decline of 10 to 20 percent over the next 12 to 24 months,” said the Goldman CEO. However, in his opinion, this correction is neither exceptional nor alarming. Rather, it is a healthy market reaction after an exceptionally strong rally. “A price drop of 10 to 15 percent often occurs, even in positive market phases,” said Solomon, adding: “Prices initially rise sharply, then correct themselves again so that investors can reassess the situation.”
According to “CNBC” in Hong Kong, Ted Pick, CEO of Morgan Stanley, made similar statements. He spoke of a healthy setback that investors should even welcome – as long as it is not triggered by a macroeconomic crisis. Such a slowdown could dampen overheated expectations and create new scope for sustainable growth.
Price rally fuels bubble worries
Concern has recently arisen on the market that the extraordinary price rally of recent years – particularly in technology and AI stocks – is increasingly moving away from real economic fundamentals. Back in October, JPMorgan boss Jamie Dimon warned of overheating and an impending, far-reaching consolidation on the US stock market. In addition to the long-standing AI hype, Dimon also cited factors such as geopolitical tensions, high government spending and increasing remilitarization as reasons for his expectation of a market correction.
“The technology multipliers have been exhausted,” confirmed Goldman CEO Solomon, according to “Reuters”. However, he also stated that in his opinion this does not apply to the broader market.
This is what the investment bank CEOs advise investors
However, there is no reason for investors to flee from the warnings of investment professionals about a market correction, as the Goldman Sachs CEO himself emphasized. He therefore did not recommend hectic rebalancing in preparation for a market downturn. A correction, he emphasized, does not change the fundamental, structural conviction of how one wants to invest one’s capital.
“None of us are trying to time the market,” Solomon said of his colleagues at Goldman Sachs at the event in Hong Kong, according to “Investopedia.” Therefore, his advice to investors is to “review your portfolio allocation and stay invested.” According to the CEO, this advice has already proven successful in the past.
Editorial team finanzen.net
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