- Leon Cooperman sees the S&P 500 dropping another 20% to around 3,100 points before it bottoms out.
- The billionaire investor believes the US will be in recession by 2023’s second quarter.
- Cooperman is cautious about index funds. He anticipates stubborn inflation, higher interest rates, and bearish sentiments.
Leon Cooperman has warned the S&P 500 could tumble another 20%, and predicted the US economy will slump into a recession next year.
“I don’t think the final lows are reached,” he said. CNBCThe benchmark stock index will be available Tuesday. “You could reach the low 3,000s next year.”
The billionaire investor pointed out that the stock market has lost 35% to its peak during previous recessions. The S&P 500 has tumbled 20% so far, from over 4,800 points in January to around 3,900 points today.
If Cooperman is correct, the index might bottom at around 3,100 points — its lowest level since July 2020.
Unsurprisingly, Omega Family Office’s chief warned investors to avoid buying index funds. Instead, he advised investors to find a money manager who is able to take both long and short positions and look for bargains.
Cooperman stated, “We’re looking at a long period with low returns in averages and I’m looking for weakness not strength.” “There are many individual stocks that are cheap.”
Former chief of Goldman Sachs’ asset-management arm attributed the grim market outlook to years of reckless government spending and artificially low rates. These policies inflate asset prices, and increase federal debt, which set the economy up for a difficult downturn and a cash crunch.
Cooperman stated that “We have pulled forward demand due to very inappropriate fiscal or monetary policies and ultimately a cost will be paid.”
A veteran investor foresaw that price increases would continue to push the Federal Reserve to raise interest rates. They have been raised from close to zero in March to upwards 3% today and could reach 5% next year, according the US central bank.
Cooperman stated that “We are likely facing continued high inflation and higher interest rates.” Cooperman stated, “Neither the Fed nor me know where the interest rates need to go to restrain the economy.”
He said that the US economy would shrink next year due to rising interest rates and other growth headwinds.
Cooperman stated that “The combination Fed tightening and QT, strong dollars, and the oil price will cause a recession in 2023”. He used an acronym for “quantitative loosening”, which is a reduction of the money supply.
