The S&P 500 could also be up considerably this yr and economists seem like strolling again recessionary predictions, however issues aren’t as rosy as they seem, in response to one Wall Street icon.
Leon Cooperman, chairman and CEO of Omega Advisors, a New York-based funding advisory agency with over $3.3 billion in property below administration, appeared on CNBC’s Squawk Box on Sept. 7, with ideas of a rising recessionary local weather in thoughts.
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Cooperman — whose web value is estimated at $2.5 billion in response to the Bloomberg Billionaires Index — mentioned regardless of some encouraging financial traits, a recession is just about unavoidable.
“I don’t think interest rates are too high. The stock market has been going up,” says billionaire investor Leon Cooperman. “Ultimately we’ll end up with a recession. It will be caused by either QT (quantitative easing), the Fed the price of oil or the dollar. Right now everything is well-behaved.”
Asked why a recession looms within the shadow of a burgeoning inventory market, Cooperman mentioned all is just not what it appears, market-wise.
“Even at a 16.3% year-to-date uptick, the S&P 500 can be deceptive,” he famous. “Seven companies account for 73% of all of the S&P’s gains. Everyone else is — the other 27% — are averaging about 3% or 4% gains for the year.”
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Cooperman additionally mentioned he’s one of many few individuals who don’t suppose rates of interest are that prime proper now.
“Maybe it’s my age, because I’ve been around a while, but prior to 2008, the ten-year government bond yielded in line to nominal gross domestic product,” he mentioned. “If you have real growth at around 1.5% and inflation bottoming out at 3 or 4% it wouldn’t be surprising to me if the 10-year bond goes to 5.5%. – it’s currently around 4%.”
There’s no signal that rates of interest are out of whack, Cooperman famous.
“What’s the sign that interest rates are too high?,” he mentioned “The stock market is going up even as it’s a bit speculative there’s no indication the Federal Reserve is too restrictive.”
Cooperman additionally believes the U.S. will wind up with a recession even because the economic system appears typically okay.
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“Morgan Stanley’s Mike Wilson consensus view is that we’d had a difficult first half and a better second half of 2023 — I think that scenario is reversed,” he mentioned. “(In the first half of 2023) people were very negative and finally caught up with the stock market. Secondly, the price of oil declined, and that was a positive and a strong dollar reversed course, which also helped the economy.”
That situation units the stage for a recession heading into the vacation season and into 2024, Cooperman added.
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Source: www.thestreet.com”