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Global markets may be due for a reality check after this year’s relentless rally, as Goldman Sachs and Morgan Stanley on Tuesday cautioned investors to brace for a drawdown over the next two years.
Equities worldwide have been soaring, hitting record highs this year, driven by AI-linked gains and expectations of rate cuts. Over the past month, key U.S. indexes have scaled new peaks, Japan’s Nikkei 225 and South Korea’s Kospi have hit fresh highs, while China’s Shanghai Composite has notched its strongest level in a decade on easing U.S-China tensions and a softer dollar.
“It’s likely there’ll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months,” said Goldman Sachs CEO David Solomon at the Global Financial Leaders’ Investment Summit in Hong Kong. “Things run, and then they pull back so people can reassess.”
However, Solomon noted that such reversals were a normal feature of long-term bull markets, noting that the investment bank’s standing advice to clients remains to stay invested and review portfolio allocation, not attempt to time markets.
