Goldman Sachs and Morgan Stanley warn of a market correction: "Everything goes well at first, then it starts to go down."

Goldman Sachs and Morgan Stanley warn of a market correction: "Everything goes well at first, then it starts to go down."

Artificial intelligence and rate cuts have become the main drivers of the 2024–2025 global rally. However, notes a growing risk of asset overvaluation, from the US Nasdaq to Asia's Nikkei. Experts predict a 10–20% correction will be a natural reaction to excessive optimism and "AI euphoria" among investors.
Following a meteoric rally that brought stock indices to record highs, the world's largest banks, Goldman Sachs and Morgan Stanley, are warning investors that a market correction is on the horizon.
Experts believe that overheated growth, fueled by the artificial intelligence boom and expectations of rate cuts, will inevitably cool down—and this could test global markets.

Goldman Sachs and Morgan Stanley warn of a market correction: "Everything goes well at first, then it starts to go down."

Global rally and signs of overheating

In 2025, global stock markets experienced strong growth.

The S&P 500 and Nasdaq Composite reached all-time highs,
Nikkei 225 and Kospi broke long-standing records,
The Shanghai Composite posted its best performance in a decade.


The main catalysts were the AI ​​boom and expectations of monetary easing. The strengthening of tech giants, the declining dollar, and improved relations between the US and China created an atmosphere of global optimism.

But now analysts warn that growth is often followed by a pause.

Goldman Sachs: "A normal correction is not a disaster"
Goldman Sachs CEO David Solomon said at the Global Financial Leaders Summit in Hong Kong:

"It's quite possible that markets will correct by 10-20% over the next 12-24 months. Everything is going as usual, and then comes the time for rethinking."

According to him, even such declines should not frighten investors:

"A 10-15% drawdown is normal during a healthy bull cycle. It doesn't undermine the fundamental principles of capital allocation."


Morgan Stanley: "The recession is not a crisis, but a market cleansing."
His colleague, Morgan Stanley CEO Ted Peek, added on the same panel:

"Periodic downturns are not signs of a crisis, but healthy development. We must be prepared for 10-15% declines unrelated to macroeconomics."

This statement reflects Morgan Stanley's more philosophical view: a correction is not a glitch, but a necessary stage in long-term growth , especially after speculative surges fueled by new technologies.

IMF and regulators warn

Solomon and Peake's positions echo concerns previously expressed by the International Monetary Fund, which warned of the risk of a "sharp revaluation" of assets.
Even the US Federal Reserve and the Bank of England have noted that excessive euphoria in the stock market could lead to short-term volatility.

"When AI stocks grow faster than corporate profits, the market loses touch with reality. In such conditions, even small macro shocks can trigger an avalanche-like correction," explains FX24 Macro Research analyst Jason Lee.

Asia is a capital attraction

Amid the risk of a global pullback, Asia is becoming a key destination for smart money.
Goldman Sachs and Morgan Stanley have identified four countries that could become growth centers:

China - technological and biotechnological innovations,
Japan - Corporate Reforms and Improved Corporate Governance,
India - infrastructure boom and population growth,
Hong Kong is a strategic bridge between East and West.

These regions could benefit from capital inflows if Western markets do enter a correction phase.

FX24 Analytics Forecast

FX24 Analytics experts identify three scenarios for 2025–2026:

Baseline (50%) – a correction of 10–15% in the US and Europe with a smooth recovery in the second half of 2026.
Negative (30%) - a 20% decline due to increased geopolitical risks and worsening corporate reporting.
Positive (20%) - short correction followed by a new rally influenced by the tech sector.

The warnings from Goldman Sachs and Morgan Stanley aren't a panic signal, but a reminder of the nature of the market: growth is always followed by a pause.
Investors who keep a cool head can use the correction as an opportunity to rebalance and enter promising Asian and AI sectors.
By Claire Whitmore

November 05, 2025

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