Top Wall Street Executives Caution on Potential Market Drop Amid Lofty Valuations

Top Wall Street executives are warning investors to prepare for a potential stock market correction of over 10% within the next one to two years and they argue it could actually be a healthy sign for the market’s long-term outlook.

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Mike Gitlin, president and CEO of Capital Group, said that while corporate earnings remain solid, valuations are becoming increasingly difficult to justify. Speaking at a financial summit hosted by the Hong Kong Monetary Authority on Tuesday, Gitlin noted that current market levels leave little room for error.

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“When people assess whether stocks are cheap, fairly valued, or expensive, most would agree we’re somewhere between fair and full,” Gitlin explained. “But not many would say we’re sitting between cheap and fair.” He added that the same observation applies to credit spreads, which remain tight compared to historical norms.

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Gitlin’s cautionary remarks were shared by other major Wall Street figures, including Morgan Stanley CEO Ted Pick and Goldman Sachs CEO David Solomon. Both executives pointed out that pullbacks are a natural and even necessary part of market cycles especially after a strong rally.

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Pick said that while markets have made significant progress, investors should remain mindful of ongoing risks tied to U.S. monetary policy and global geopolitics. “Yes, markets may appear expensive,” he said, “but the reality is that systematic risk has probably narrowed.”

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According to Pick, the next couple of years will likely bring sharper differentiation between companies. “By 2026, markets will pay more attention to earnings quality,” he said. “We’ll see stronger companies separating themselves from the pack while weaker ones lag behind.”

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He also pointed out that the global market for new issues remains vibrant, with investors still willing to take calculated risks. “We should actually welcome the idea of 10% to 15% market pullbacks that aren’t triggered by a major macro shock,” Pick said. “Those are healthy developments that help reset valuations and maintain long-term balance.”

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Goldman Sachs’s Solomon echoed that sentiment, saying that while technology valuations look “full,” the broader market still offers reasonable opportunities. He advised investors to remain invested rather than attempting to time the market, stressing the importance of reviewing portfolio allocations instead.

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“Our message to clients has been consistent: stay invested, assess your allocations, and don’t overreact to short-term market moves,” Solomon said.

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He added that moderate corrections of 10% to 15% often occur even during bull markets, without disrupting the overall flow of capital or long-term investment strategies. “It just means markets run up and then cool off a bit, giving investors a chance to reassess,” Solomon explained.

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Taken together, the comments from Gitlin, Pick, and Solomon underscore a growing consensus among financial leaders: a correction may be inevitable, but it’s not necessarily something to fear. In fact, a measured pullback could help stabilize valuations, reduce speculation, and create better entry points for long-term investors.

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With corporate earnings still strong and investor appetite for risk remaining high, the next market downturn could be less about crisis and more about calibration. For seasoned investors, that means focusing less on short-term volatility and more on the opportunities that follow when the dust settles.

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In essence, Wall Street’s message is clear markets can’t rise in a straight line forever, and a 10% to 15% dip shouldn’t be mistaken for disaster. Instead, it may be exactly what’s needed to keep this cycle sustainable.

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