US stocks will fall 10-20% in the next 12-24 months?

Some Wall Street giants believe the US stock market could soon correct, although they are not panicking.

Goldman Sachs CEO David Solomon

Speaking at a forum in Hong Kong, David Solomon, CEO of Goldman Sachs, said a 10-20% decline in the stock market is “highly likely” in the next 12-24 months, echoing comments he made in October at a conference in Italy.

Meanwhile, Morgan Stanley CEO Ted Pick said investors should “welcome the possibility of a 10-15% correction” if it comes “without a macro shock”.

The market reacted negatively to these comments, sending US stocks lower across the board in Tuesday's trading session.

Analysts say there is growing concern on Wall Street that the wave of AI investments that has helped markets hit new highs and fueled economic growth could be forming an asset bubble. A brief correction could cool valuations and bring investor expectations back into line.

The Nasdaq Composite fell nearly 2% in early trading after the remarks and was still down about 1.6% by the end of trading. High-priced AI stocks were hit hardest: Palantir (PLTR) fell as much as 8%, despite better-than-expected third-quarter results and a boosted full-year outlook.

Still, Solomon stressed that one should not overreact. “None of us are bottom callers,” he said, adding: “Goldman Sachs’ advice was to review your portfolio and stay invested. That advice has worked.”

Investors are increasingly wary of the risk of an AI bubble, as stock markets continue to hit records despite economic and geopolitical risks. Large-scale data center and cloud computing deals have many worried that the US may be entering a “second dotcom bubble”, when over-expectations for the commercialization of the internet in the early 2000s led to infrastructure overcapacity and absurdly high stock valuations.

Not only Solomon and Pick, Jamie Dimon, CEO of JPMorgan Chase, also warned in October that a significant correction could happen in the next 6 months to 2 years, and the market “is underestimating this risk”.

Fed Chairman Jerome Powell also said in September that the stock market is “quite overvalued.”

“Pricing models suggest that risky asset prices are well above fundamentals, increasing the probability of a disorderly correction in the event of an adverse shock,” the International Monetary Fund (IMF) wrote in a recent report.

Not all investors are pessimistic, however. Some experts say the tech companies leading the current AI wave are on much stronger financial footing than those during the dotcom bubble, and their valuations are more reasonable.

Bubble skeptics also point to interest rates, with the Federal Reserve expected to cut interest rates next year, supporting economic growth and reducing the risk of a credit crunch that could cause the bubble to burst.

While acknowledging high stock valuations, Solomon and Pick say the market outlook is still more positive than negative.

“Investors are still willing to take risks, so I think the upcoming investment environment is generally quite favorable,” Pick said.

Solomon said tech stock valuations are now around 80% of their historical highs, but “when you look at the market as a whole, there are still many sectors that are reasonably priced, especially in the context of good earnings growth.”

He also said that expansionary fiscal policy in developed economies will continue to be a driving force for stock markets.

“I think the environment is pretty positive right now. Of course, there are a lot of things that could go wrong, but at the moment the chances are not high,” Solomon said.

He reiterated that financial bubbles can last for years. He cited the example of former Fed Chairman Alan Greenspan warning of “irrational exuberance” in 1996, more than three years before the dotcom bubble actually burst.

On Twitter, CNBC financial analyst Jim Cramer commented: “Is the valuation too high? It’s always high.”

Source: https://thoibaonganhang.vn/chung-khoan-my-se-giam-10-20-trong-12-24-thang-toi-173081.html