Several of Wall Street’s largest strategists are advising clients to brace for a near-term retreat in U.S. equities after a powerful rally drove the S&P 500 to record territory. Morgan Stanley strategist Mike Wilson forecasts a decline of as much as 10% this quarter, citing elevated valuations and the drag from recently imposed tariffs. Evercore ISI’s Julian Emanuel anticipates a pullback of up to 15%, while a Deutsche Bank team led by Parag Thatte argues the market is overdue for at least a modest slide after more than three months of gains. The cautions follow a run-up that pushed the S&P 500’s 14-day relative-strength index above 70, a level technicians view as overbought. Option prices show rising demand for protection: contracts hedging against a 10% drop in the SPDR S&P 500 ETF over the next 60 days are near their costliest levels since the regional-bank turmoil of May 2023. Separately, former Treasury Secretary Henry Paulson and another Treasury chief who served during the 2008 financial crisis warned that the U.S.’s $29 trillion Treasury market could face stress if Washington fails to correct what Paulson called an “unsustainable” fiscal trajectory. Paulson urged policymakers to prepare a fiscal contingency plan and said it is unclear when Treasuries might “hit the wall.” Bond investors added that the $2 trillion market for inflation-linked securities could be the first to crack if the Bureau of Labor Statistics becomes politicized. Disappointing ISM services data, sticky inflation and rising yields have already weighed on sentiment, leaving Asian and European bourses mixed and prompting traders to scale back bets on imminent Federal Reserve rate cuts. Analysts expect volatility to stay elevated ahead of Friday’s U.S. jobs report and as investors gauge the economic impact of the latest 145% tariff on Chinese goods.