Catenaa, Tuesday, November 04, 2025- Wall Street Chief Executives said investors should brace for an equity market drop of more than 10% in the next 12 to 24 months, and that such a correction may be a positive development.
Corporate earnings are strong, but “what’s challenging are valuations,” said Mike Gitlin, who helps oversee about $3 trillion as president and Chief Executive Officer of Investment Manager Capital Group, during a financial summit organized by the Hong Kong Monetary Authority on Tuesday.
On whether stocks are cheap, fair, or fully valued, Gitlin said most people “would say we’re somewhere between fair and full, but I don’t think a lot of people would say we’re between cheap and fair,” he said. The same goes for credit spreads, Gitlin added.
His views were echoed by Morgan Stanley CEO Ted Pick and Goldman Sachs Group David Solomon, who also see the possibility of a significant selloff in the coming period and said pullbacks are a normal feature of market cycles.
Pick said markets have come a long way, but there’s still “policy error risk” in the US and geopolitical uncertainty.
“We should also welcome the possibility that there would be 10 to 15% drawdowns that are not driven by some sort of macro-cliff effect,” Pick said, calling that “a healthy development.”
The S&P 500 index is trading at 23 times forward earnings estimates, above its five-year average of 20 times. Similarly, the Nasdaq 100 Index fetches a multiple of 28 times, compared with nearly 19 times in 2022.
Futures on the tech-heavy gauge dropped as much as 1.8% on Tuesday, with AI bellwether Palantir Technologies Inc. declining more than 7% in pre-market trading on worries about the company’s lofty valuation after a record run-up.
