Wall Street Is Warning Investors to Get Ready for Stocks to Drop

A chorus of stock market prognosticators at some of Wall Street’s biggest firms is warning clients to prepare for a pullback as sky-high equity valuations slam into souring economic data.

On Monday, Morgan Stanley, Deutsche Bank AG and Evercore ISI all cautioned that the S&P 500 Index is due for a near-term drop in the weeks and months ahead. The predictions come after a furious rally from April’s lows that propelled the gauge to levels it has never seen before.

Morgan Stanley strategist Mike Wilson sees a correction of up to 10% this quarter as tariffs hit consumers and ...