Leon Cooperman stated the robust American economy would ultimately slip into a slump and forecasted the S&P 500 would drop by around 22% before bottoming out. In a recent interview with Fox Business, the multibillionaire investor said, “I’m expecting this all ends in a recession.”
“I think QT, Fed tightening, the high price of oil, or maybe a strong dollar — some combination of these four things creates a recession, and the final bottom of the market will be about 35% below the 4,800 peaks.” With Cooperman’s reference to “QT,” the Federal Reserve’s balance sheet reduction to lower the US money supply is meant. During the epidemic, the US central bank bought a lot of bonds to boost growth and add liquidity to the economy.
This Dilemma over Inflation might Lead to a Recession
The continual reaction of the central bank to high inflation is known as “Fed tightening.” Throughout the previous year, the Fed increased interest rates from virtually zero to as high as 4.5%, and it has hinted at more hikes in the months to come. A slower rate of price rise is possible since higher rates encourage saving over consumption, investment, and hiring. They can, however, also reduce demand, which lowers asset prices and increases the likelihood of a recession.
According to Cooperman’s remarks, the S&P 500 will drop to about 3,100 points, which is more than a third below the benchmark index’s top of 4,800 points in January 2022, as a result of rising rates, a declining money supply, and other reasons.
Leon Cooperman is Predictions Often Came True
The wealthy investor, who also served as the previous head of Goldman Sachs‘ asset management group, did caution that a market slump may present some excellent offers for savvy shoppers.
Cooperman, who in 2018 changed the structure of his hedge firm Omega Advisers into a family office, also foresaw rising interest rates and persistent inflation. Cooperman also raised concern over the “shocking” size of the national debt, saying that it has increased from $20 trillion in 2017 to nearly $31 trillion in 2018.
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