Billionaire investor Leon Cooperman told CNBC on Friday he expects the stock market will be lower than current levels one year from now.
Cooperman’s comments came one day after the S&P 500 notched yet another record close in 2021, finishing Thursday’s session at 4,211.47. The broad equity index has risen roughly 12% year to date and about 43% in the past 12 months.
“Let’s face it. The market is facing the fact that taxes are going up, interest rates are going up, and inflation is going up. And we have a reasonably richly appraised market. So cyclically I’m engaged. But I got an eye on the exit,” Cooperman said in an interview on “Squawk Box.”
“I suspect the market will be lower a year from today. But I don’t have to make that guess now. This is not going to end well,” the chairman of the Omega Family Office added. “But nobody, myself included knows when this is going to end. We just watch the things that would normally indicate an end.”
Cooperman said he considers himself to be “a fully invested bear,” while acknowledging the market has lately “done better than I would’ve thought.”
In an attempt to explain his positioning, Cooperman said, “Bear markets don’t materialize out of immaculate conception. They come about for certain fundamental reasons,” such an impending recession, “a hostile Fed” and “speculative valuation.”
“The market has been very self-corrective in the sense that the FAANG stocks are not expensive, but the aspiring FAANG stocks are very expensive and they’ve been corrected in a serious way,” he said. “The whole slowdown in the SPAC area is self-correcting,” Cooperman added, saying he doesn’t see the conditions currently that would lead to a significant market decline in the near term.
At the same time, Cooperman stressed that the pace of gains the market has seen after bottoming out in March 2020 following a coronavirus-driven plunge cannot continue forever.
“However, however — this is the big however — I think we should recognize we’re pulling demand forward and that the longer-term outlook is not particularly favorable, in my view,” he said.
Cooperman said his forecast on inflation is different from Federal Reserve Chairman Jerome Powell’s view. The top U.S. central banker has repeatedly said he thinks inflationary pressures will be “transitory” as the economy recovers from the Covid pandemic, while stressing that Fed expects to keep monetary policy accommodative for the foreseeable future.
“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.