ISTANBUL 

The CEOs of US investment banks Morgan Stanley and Goldman Sachs warned investors Tuesday about a possible 10% to 20% market correction in equity markets in the next two years.

“It’s likely there’ll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months,” said Goldman Sachs CEO David Solomon at the Global Financial Leaders’ Investment Summit in Hong Kong. “Things run, and then they pull back so people can reassess.”

Solomon pointed out that the reversals are normal features of long-term bull markets and the investment bank's standard recommendation to customers is to stay invested and reassess portfolio allocation rather than try to play the market.

“A 10 to 15% drawdown happens often, even through positive market cycles,” he said. “It’s not something that changes your fundamental, your structural belief as to how you want to allocate capital.”

Ted Pick, CEO of Morgan Stanley, advised investors to embrace sporadic declines, characterizing them as positive developments rather than crisis indicators.

“We should also welcome the possibility that there would be drawdowns, 10 to 15% drawdowns that are not driven by some sort of macro cliff effect,” he said.

Solomon and Pick's opinions follow recent IMF warnings of a potential steep correction, as well as warnings about inflated market valuations from Bank of England Governor Andrew Bailey and US Federal Reserve Chair Jerome Powell.