- Billionaire investor Leon Cooperman said the stock market will be lower a year from now.
- He sees the higher taxes, rising interest rates, and rising inflation weighing on stocks.
- Cooperman also said the Fed will be “surprised” at the pickup in inflation.
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Leon Cooperman told CNBC on Friday the stock market will be lower a year from today as stocks face downward pressure from rising interest rates, higher taxes, and inflation.
His comments come just one day after the S&P 500 closed at another record high and brought its year-to-date gains to 12%.
The billionaire Omega Advisors chairman said that he’s currently a “fully invested bear,” and he doesn’t see any conditions that would lead to a significant market decline in the near term.
But he emphasized that the US is “pulling demand forward” and the longer-term outlook is not particularly favorable.
“If you spoke to a hundred economists today and he asked them what their view is of the potential real growth of the US economy, the response would be centered around 2%,” Cooperman said. “We’re growing this year four to five times potential, yet the Fed is persistent in keeping interest rates at near zero. That doesn’t make any great sense to me. It’s just pushing people out on the risk curve.”
Stocks are forward looking instruments, and gained last year amid a pandemic on the expectation of a massive economic rebound in the future. Now that US GDP numbers are demonstrating that a rebound is currently underway, Cooperman is questioning how much further the market can continue its pace of gains.
He also said that the multi-trillion stimulus packages in Washington’s pipeline won’t be the most effective way of bringing the labor market back to pre-pandemic levels, and he’s concerned about debt.
“Who pays when the party’s over?” said the investor. “We’re just racking up debt at an extraordinarily rapid rate.”
Cooperman added that he’s concerned about what rising inflation could do to stocks. While Federal Reserve chairman Jerome Powell continues to say that inflationary pressures will be “transitory,” Cooperman disagrees.
“I think that Mr. Powell will be surprised by inflation. It’s not going to be as quiescent and transitory as he thinks. I think the Fed will be forced to say something before the end of 2022,” Cooperman said.