| Tuesday, November 04, 2025 Dear Valued Reader, Three of Wall Street's most powerful CEOs delivered a remarkably consistent message Tuesday: expect a market correction of 10-15% in the coming year, and don't panic when it arrives. Speaking at a Hong Kong financial summit, executives from Capital Group, Morgan Stanley, and Goldman Sachs framed a potential pullback not as a crisis but as a natural and even beneficial market development. Key TakeawayCapital Group's Mike Gitlin, Morgan Stanley's Ted Pick, and Goldman's David Solomon all see a 10-15% market correction coming within 12-24 months. They describe it as "healthy" given valuations between "fair and full," with the S&P 500 at 23x forward earnings versus a five-year average of 20x. The Valuation ConcernMike Gitlin, who oversees about $3 trillion as CEO of Capital Group, articulated what many investors are thinking: "Corporate earnings are strong but what's challenging are valuations." When asked if stocks are cheap, fair, or fully valued, he noted 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." The numbers support this assessment. The S&P 500 trades at 23 times forward earnings, above its five-year average of 20 times. The Nasdaq 100 fetches 28 times earnings, compared with nearly 19 times in 2022. These elevated multiples persist despite a slowing U.S. economy and ongoing government shutdown. Palantir's 4% decline in extended trading Tuesday on valuation concerns illustrates the tension. The AI company's record run-up has left it vulnerable to any shift in sentiment, exactly the kind of vulnerability these CEOs are highlighting. Why They See It as HealthyMorgan Stanley's Ted Pick framed potential corrections in reassuring terms: "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. That's a healthy development." Pick's logic centers on market normalization. Markets have "come a long way," but valuations need periodic resets that allow investors to reassess allocations without fundamental economic damage. He expects 2026 will bring greater earnings dispersion, where stronger firms outperform while weaker ones lag—a dynamic that requires room for stock-specific movements rather than broad index gains. Goldman Sachs CEO David Solomon echoed this view, noting that equity drawdowns of 10-15% "often occur through positive cycles without altering the general direction of capital flows or long-term allocations. It just means things run and then they pull back so people can reassess." The Technology Multiple QuestionSolomon acknowledged that "technology multiples are full" but emphasized that's not true for the entire market. This distinction matters for investors wondering where risk concentrates. The massive run in tech stocks, particularly AI-related names, has created pockets of vulnerability even if broader market valuations remain more reasonable. Citadel CEO Ken Griffin added historical perspective, noting that "markets are most irrational at the heights of a bull market and the depths of a bear market," before adding that now "we are very deep into a bull market." His implication: irrational exuberance may be creeping into certain segments. Policy and Geopolitical RisksPick highlighted continuing uncertainties that could trigger corrections, including "policy error risk" in the U.S. and geopolitical tensions. These factors create potential catalysts for the pullbacks these CEOs anticipate, though none suggested they expect catastrophic declines. Importantly, Pick noted that "systematic risk has probably narrowed," suggesting the financial system itself remains healthy even if asset prices look stretched. This distinction between valuation risk and systemic risk is crucial—corrections driven by valuation normalization differ fundamentally from crises driven by financial system failures. What Investors Should DoDespite expecting corrections, Goldman's advice to clients has been straightforward: stay invested, review portfolio allocations, and avoid trying to time the market. This approach acknowledges that predicting correction timing is nearly impossible, even when acknowledging they're likely. The CEOs' consensus that corrections would be "healthy" suggests they view current market strength as sustainable despite elevated valuations. The key is distinguishing between normal cyclical pullbacks and crisis-driven crashes. These executives clearly expect the former rather than the latter. Market ImplicationsThe synchronized messaging from major Wall Street CEOs serves multiple purposes. It manages client expectations about near-term volatility while reinforcing the message that pullbacks don't necessarily signal economic crisis. It also provides these firms cover if corrections materialize—they warned clients in advance. For investors, the message is nuanced: valuations justify caution, corrections are likely, but staying invested through volatility remains the recommended approach. The CEOs' emphasis on 2026 earnings dispersion suggests stock selection becomes more important as broad index gains potentially moderate. The Bottom LineWhen Capital Group, Morgan Stanley, and Goldman Sachs CEOs all deliver the same message, it's worth attention. Their prediction of 10-15% corrections in the next 12-24 months reflects genuine valuation concerns, particularly in technology, but their framing of such moves as "healthy" suggests confidence in underlying economic fundamentals. The subtext is clear: don't panic if corrections arrive, view them as opportunities to reassess rather than reasons to exit, and recognize that bull markets include periodic pullbacks without ending the broader upward trend. Whether this optimism proves justified depends on earnings growth justifying current valuations and the absence of policy errors or geopolitical shocks that trigger more than just healthy corrections. Black Friday’s Smartest $7 You’ll Spend”Forget clothes. Forget gadgets. Get an indicator that can literally save your portfolio from the next market top. The Dark Cloud Reversal lights up yellow when reversals form — and plots your exact exit. 👉 Grab it now for $7 — before it goes back to full price. Stay ConnectedThank you for reading. I'll continue monitoring market valuations and professional investor sentiment about potential volatility ahead. Until next time, FindBetterTrades | 
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