Goldman Sachs CEO David Solomon (NYSE:GS) warned of a likely 10%–20% market drawdown within the next 12 to 24 months. Morgan Stanley CEO Ted Pick (NYSE:MS) said 10%–15% pullbacks can be healthy even inside a positive cycle. The comments shook investor sentiment this week, dragging technology stocks lower in early trading and prompting further risk-off moves in Asia. Short-term, those remarks amplified volatility and cooled buy-the-dip demand. Longer-term, they reinforced a familiar pattern: periodic corrections do not necessarily derail multi-year gains.

The comments came at the Global Financial Leaders Investment Summit in Hong Kong and landed after a string of market events that already tested investor resolve. Earlier this year, equities fell nearly 20% in April before recovering. In the last decade investors experienced a bear market in 2022, a regional banking crisis in 2023, and an intraday bear market this April. Yet over that stretch stocks have risen more than 220%, underscoring how drawdowns frequently coexist with strong cumulative returns.

Solomon framed the prospect of a 10%–20% pullback as part of normal market mechanics. Pick described smaller corrections as healthy cleansing events that help sustain risk appetite over time. Their remarks matter because the market’s current behavior depends heavily on persistent dip buyers. If that pattern weakens, strategists say retail investors could become skittish, turning routine corrections into deeper, longer selloffs.

Concerns were compounded by high-profile bets outside of the bank-commentary circuit. Investor Michael Burry, known for his short position on housing ahead of the 2008 crisis, disclosed short positions in Nvidia (NASDAQ:NVDA) and Palantir (NYSE:PLTR) in his latest 13F filing. Those moves feed retail attention and increase selling pressure in large-cap technology names when headlines converge.

Historical context is important. Wilmington Trust reports that over the past 35 years distinct drawdowns of more than 10% have occurred 13 times, roughly once every three years. That frequency helps explain why strategists and executives call pullbacks a normal — even healthy — part of long-term market cycles. Yet the timing of warnings and market psychology matter. A credible warning from well-known leaders can trigger immediate repositioning by algorithmic funds and discretionary traders, accelerating short-term declines.

Complicating the outlook this week is a major legal decision on tariff policy. The Supreme Court is hearing arguments on whether President Trump had authority under the International Emergency Economic Powers Act to impose sweeping global tariffs. Standard Chartered (LON:STAN) flagged in a research note that the market currently expects a benign outcome but that considerable uncertainty remains about how the court will rule.

A ruling that enjoins or narrows the administration’s tariff authority could have several market effects. In the near term, an unwind of sweeping tariffs might weaken the U.S. dollar and push yields higher as tariff revenue expectations fall. Some analysts warn that reduced tariff receipts could worsen the U.S. fiscal position and spur investors to sell dollar-denominated assets. Conversely, a decision upholding broad tariff authority would likely be treated as short-term friendly for U.S. risk assets by reducing policy uncertainty.

JPMorgan Asset Management strategist David Kelly (NYSE:JPM) notes that a ruling against sweeping tariffs would increase the chances of lower overall tariff rates, which could reduce inflationary pressure and boost growth — an outcome that would particularly support consumer-facing stocks. That possibility contrasts with the earlier market hit in April when tariff headlines contributed to a nearly 20% decline. The court’s decision, therefore, is more than a legal footnote: it could feed currency, yield and equity volatility depending on the outcome and how quickly government policy changes.

Meanwhile, compensation dynamics inside the industry are adding another visible element to market sentiment. Compensation consultant Johnson Associates projects that bonuses will grow for a second consecutive year as record trading revenue, ongoing dealmaking and the prospect of interest rate cuts combine to lift year-end payouts. Cash bonuses and equity awards for equity sales and trading professionals are expected to rise the most — by roughly 15% to 25% from 2024 — while equity-related businesses overall are set to outpace fixed-income counterparts. Real estate-related groups appear to be the only segment showing no change.

Despite widening payouts, hiring remains muted. Johnson Associates reports that firms are holding headcount steady as they implement cost efficiencies, particularly in technology. Artificial intelligence and automation could reduce staff needs by 10% to 20% over the next three to five years, the consultancy warns. In short, pay pools may increase even as total payrolls do not, because firms are prioritizing variable compensation tied to performance.

The interaction of higher bonuses and muted hiring matters for market behavior. Larger year-end payouts can boost consumer and investor confidence among higher-earning employees, supporting discretionary spending and equity inflows. However, if technology-driven headcount reductions become sharper than expected, the boost to aggregate demand could be smaller and concentrated among fewer workers, which would temper any broad-based economic uplift.

The big-picture takeaway is that markets are threading multiple, sometimes contradictory, signals. Executive warnings about likely drawdowns tend to amplify short-term volatility because they directly influence risk positioning. Legal uncertainty over tariffs adds a separate macro channel that can move currencies and yields, with knock-on effects for asset allocations. And compensation trends show where firms are allocating the benefits of a strong market: more pay for performance, less appetite for expanding payrolls.

Investors watching the coming weeks should track a few measurable inputs. First, trade volumes and put/call ratios will reveal whether retail and institutional investors are stepping back. Second, currency and Treasury moves after any Supreme Court news will show immediate market verdicts on fiscal implications. Third, bank and broker trading revenue announcements and updated compensation guidance will indicate whether bonus projections hold as the year closes.

None of this changes the plain fact that drawdowns have been a recurrent feature of recent years without destroying long-term returns. The current mix of CEO warnings, high-profile short positions, legal uncertainty over tariffs and rising bonuses creates fertile ground for volatility. Market participants, for now, appear willing to accept periodic pullbacks as part of a broader upward trend, but that acceptance depends on the continued presence of dip buyers and a gradual resolution to policy questions that are currently unsettled.