There’s no indication that interest rates are too high, Leon Cooperman told CNBC.
Without tighter policy, a recession is still on the table, and could be ignited by a number of risks.
The billionaire investor also sees a return to this year’s stock market highs as unlikely.
Leon Cooperman is holding out on expectations that a US recession is forthcoming, noting that he is among the few still calling for higher interest rates, he told CNBC on Thursday.
“What’s the sign that interest rates are too high?” the Omega Advisors founder asked. “The stock market’s been going up, the market has a very speculative tone to it. In Georgia, their flash estimate in GDP was like 5%. There’s no indication that the Fed is restrictive.”
Without a hawkish Federal Reserve, the billionaire investor expects the US economy to suffer a hard landing, naming a number of factors that could push it over the edge. Those include the Fed’s quantitative tightening campaign, the rising price of oil, or the US dollar.
So far, these factors have been “reasonably well behaved,” Cooperman said, which is why markets have performed strongly through the past few quarters. For instance, earlier oil price declines and a weakening dollar were seen as economic positives, fueling investor sentiment.
But Cooperman cautioned about betting on further strength moving forward, and said he views the S&P’s current price as too high, and its equity risk premium as too low.
“I don’t expect we will see a new high in the market for a long time. We’ve had a very bad policy mix,” he said.
To contend with this, Cooperman looks for two criteria when picking stocks: those that are cheap and able to repurchase their shares.
The investor’s Thursday comments were an extension of previous outlooks he’s given, saying in June that the S&P 500’s rally was largely sentiment driven, and unlikely to repeat January’s 4800 point high for several years.
Speaking with CNBC, Cooperman also commented on Nvidia, having previously criticized the mania around the chip maker. While the company’s stock has risen 214% this year on speculation that it will be a key component of a coming artificial intelligence era, Cooperman compared it to Cisco.
“In 2000, everybody was hot on the internet: Cisco, Cisco, Cisco. Cisco was $80. It dropped 90% to $6 in the market break when technology went down,” he said. “Cisco, 23 years later, is still below where it was in 2000.”
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