Billionaire investor Leon Cooperman doesn’t think the bull market will come anytime soon and sees only a 5% chance of the S&P 500 rising above 4,400.
“What I said in the last program,” the chairman and founder of family office Omega Advisors told CNBC on Wednesday evening, referring to a prior TV appearance, “is equities were the best house in the financial asset neighborhood, but I didn’t like the neighborhood — and I still don’t like the neighborhood.”
The hedge funder, referring to Genesis 41, added: “I felt like a Pharaoh, the Pharaoh had a dream, the dream was interpreted by Joseph, and the dream was we’re going to have seven lean years following seven fat years. So I think anybody looking for a new bull market any time soon is looking the wrong way.”
Cooperman, 79, attributed his view to financial markets coming off of a “speculative period” in recent years.
“What I said in the last program,” the hedge funder told the network, “is equities were the best house in the financial asset neighborhood, but I didn’t like the neighborhood — and I still don’t like the neighborhood.”
The pessimism comes after the worst year for stocks since the Global Financial Crisis in 2008. The S&P 500 tumbled 19.4% in 2022 and the Nasdaq Composite wiped out a third of its value. The Dow fell a comparably modest 9% but still rounded out the end of a three-year winning streak for the major averages.
Four trading days into 2023, the indexes are down on the year.
SPACS, cryptocurrencies, options trading, and “crazy valuations of the would-be FAANGs” – all of which have made a sharp reversal in 2022 after a boom the prior year – were the outcome of those “fat years,” according to the Omega Advisors founder.
“I think we’ve spent a lot of time pulling demand forward, and we gotta straighten that out,” he adding, pointing also to a super tight labor market that has 1.7 job opening for every worker looking, which will be difficult for profit margins.
Cooperman placed the chance of the S&P 500 staying in a range of 3,600 to 4,400 in 2023 at 50%, the likelihood of the index rising above 4,400 at 5%, and the possibility of levels falling into the low 3,000 range at 45%. The index closed at 3,808.10 on Thursday.
In his view, the latter depends on whether the Federal Reserve attempts to achieve its long-term inflation target of 2% rather than settling at 3-4%.
The Consumer Price Index (CPI) rose at an annual clip of 7.1% in November, the latest reading before December’s report drops next week. The Personal Consumption Expenditure (PCE) Price Index rose 5.5% the same month.
Cooperman emphasized also that a lack of confidence in the system because of “foolish policies” is even more of a burden than inflation and the Federal Reserve. He noted that price–earnings (P/E) ratios are a function of growth rates, interest rates, and confidence.
“I would basically take the position that we are in a market of stocks rather than the stock market,” Cooperman said. “I expect very little over the next few years.”
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc