- Leon Cooperman expects the S&P 500 to eke out mediocre returns for the rest of this decade.
- The billionaire investor predicts a US recession and stubbornly high inflation.
US stocks will suffer a hangover for years, and the US economy will endure stubborn inflation and slump into recession, Leon Cooperman has warned. He also trashed cryptocurrencies following the recent collapse of Sam Bankman-Fried's FTX exchange.
"We've been through probably the most speculative period in our financial history, aided and abetted by foolish fiscal and monetary policy," the billionaire investor told CNBC on Wednesday.
Cooperman pointed to the boom in cryptocurrencies, special-purpose acquisition companies (SPACs), and commission-free trading during the pandemic, fueled by near-zero interest rates and historic amounts of government stimulus.
He warned that after years of easy money and rampant speculation, it would take a while for markets to recover and reach new highs.
"We're not going back into a new bull market any time soon — that's not the way the world works," Cooperman said, cautioning a crisis might be necessary before the next boom can begin.
The veteran stock picker, who converted his Omega Advisors hedge fund into a family office in 2008, issued a gloomy forecast for the S&P 500.
"The 4,800 high this year will be the high for quite some time," he said about the benchmark stock index.
Cooperman pegged the market's current level of around 4,000 points as reasonable in a recession, and predicted the S&P 500's annual returns would be "modestly above zero" for the rest of this decade.
"I really believe the market is very fully valued and the average is going nowhere, and the action is going to be in individual stocks," he said.
Rising prices, declining growth
A prolonged economic downturn and elevated inflation lie ahead for the US, Cooperman said.
"My recession thesis is the basic belief that we've borrowed from the future and we're going into a period of time where that borrowing has to be given back," he said.
"Inflation is going to remain higher than generally anticipated because of the tight labor," he continued, referring to the shortage of US workers that has pushed up wages in recent years.
US inflation has surged to 40-year highs this year, prompting the Federal Reserve to hike interest rates from virtually zero in March to about 4% today, and to signal they could top 5% next year. Higher rates deter spending, borrowing, and hiring. That tends to relieve upward pressure on prices, but can also sap economic growth and boost unemployment.
Cooperman said recessions typically last around a year, but can persist for longer. Only when they strike does it become clear if they're mild or severe, he believes.
Bashing bitcoin
The former boss of Goldman Sachs' asset-management division took aim at crypto in the wake of exchange FTX's collapse, which has tanked coin prices and stoked fears of an industry-wide meltdown.
"I just thank God that the government never endorsed this crap," Cooperman said. He largely agrees with Warren Buffett and Charlie Munger, who have dismissed bitcoin as toxic and worthless, he noted.
Cooperman recalled that he took his money out of Bernie Madoff's fund, as he couldn't understand how the infamous Ponzi schemer consistently generated such large returns for his investors.
"When something looks too good to be true, the odds are it's not true," he said.