Top Wall Street executives are warning that U.S. equity markets could face a sharp correction after months of record gains. Goldman Sachs CEO David Solomon and Morgan Stanley’s Ted Pick both said that valuations have become “stretched” as investors pile into technology and AI stocks. Their comments triggered a mild selloff, with the S&P 500 and Nasdaq slipping in early trading. Analysts say the remarks reflect growing unease within the financial sector about overheated markets.

The warnings come as the S&P 500 trades near all-time highs, drawing comparisons with the late-1990s dot-com bubble. Many investors have ignored signals of slowing growth, betting instead on a soft landing and continued central-bank support. But with economic data releases delayed due to the ongoing U.S. government shutdown, visibility into fundamentals remains poor.

Solomon noted that “risk premiums have collapsed” and that markets are “not fully pricing in uncertainty.” Pick echoed that view, adding that the next six months could see a 10–15 percent correction if earnings fail to meet lofty expectations. The executives’ cautious tone contrasts sharply with the optimism seen in retail trading circles.

Market strategists believe the warnings may serve as a wake-up call for investors who have relied heavily on momentum and AI-linked themes. Several institutional funds are already rotating from growth stocks into more defensive holdings such as utilities and healthcare. The volatility index has risen modestly, indicating a shift in sentiment.

Analysts say that while no crash is imminent, the tone from Wall Street leaders suggests a new phase of consolidation. For corporations and investors alike, the message is clear — plan for moderation, not mania.

Source: Reuters.