“There Are No Stabilizers Left”—Cooperman Warns That Next Market Crash Will Make Traders’ “Heads Spin”

The comments below are an edited and abridged synopsis of an article by Tyler Durden

Hedge fund titan Leon Cooperman believes that staying long is the only option for equity investors as long as the Fed keeps interest rates on hold. Once the market has a reason to sell, traders can expect a tumultuous wave of selling on par with the declines seen in March 2020.

“There Are No Stabilizers Left”—Cooperman Warns That Next Market Crash Will Make Traders’ “Heads Spin” | BullionBuzz | Nick's Top Six
Engraving illustration of a mans head with shocked facial expression and spiral halftone pattern

Cooperman said, “I don’t see the condition for a big market decline presently; however—and this is the big ‘however’—we should recognize that we’re pulling demand forward and the long-term outlook isn’t particularly favourable in my view.”

This means that if investors “spoke to 100 economists today and asked them what their view is of the potential real growth of the US economy, the response would be centered around 2% real, and they would get there by saying well I think productivity growth is at 1.5%, labour-force growth is 0.5% and that’s real growth -2%. A bear might say 1.5%, a bull might say 2.5%, but it would be centered around 2%.”

“We’re growing this year 4-5x potential, yet the Fed is insisting on keeping interest rates near zero. That doesn’t make any sense to me. That’s just pushing people out on the risk curve.”

He expects the market will be lower one year from today.

While Fed Chair Powell insists that the Fed isn’t thinking about raising interest rates yet, Cooperman remains skeptical. And while Cooperman understands there’s nothing to be gained by fighting the Fed—that stocks will likely continue to climb as confidence in the Fed remains high—at some point, the market’s frothy valuations will end in tears.

Cooperman said that some of the most highly valued megacap stocks deserve their lofty prices. Asked about his holdings in Amazon, Microsoft and Alphabet, Cooperman said that he would be staying pat. He added that “they’re real substantive companies generating substantial cash, I don’t look at them as overvalued… what’s overvalued is fixed income… I don’t understand why anybody would buy a bond.”

Cooperman said that while he doesn’t see the conditions for a major decline, “when the market has a reason to go down, it’s going to go down so fast that your head is going to spin… because there’s no stabilizers left.”

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