Billionaire investor Leon Cooperman warns the S&P 500 could plunge another 20% – and predicts a US recession next year

© Rick Wilking/Reuters Billionaire investor Leon Cooperman warns the S&P 500 could plunge another 20% – and predicts a US recession next year

  • Leon Cooperman sees the S&P 500 dropping another 20% to around 3,100 points before it bottoms out.
  • The billionaire investor expects the US economy to suffer a recession in the second half of 2023.

Leon Cooperman has warned the S&P 500 could tumble another 20%, and predicted the US economy will slump into a recession next year.

“I don’t think that the final lows have been hit,” he told CNBC about the benchmark stock index on Tuesday. “You can get to the low 3,000s sometime next year.”

The billionaire investor noted the stock market has retreated by about 35% from its peak during past recessions. The S&P 500 has tumbled 20% so far, from over 4,800 points in January to around 3,900 points today.

If Cooperman is correct, the index might bottom at around 3,100 points — its lowest level since July 2020.

Unsurprisingly, the head of Omega Family Office warned investors against buying index funds. Instead, he suggested they find a good money manager who can take long and short positions, and sniff out bargains.

“We’re in store for a prolonged period of low returns in the averages, and I’m looking to buy weakness not strength,” Cooperman said. “There are a lot of cheap individual stocks around.”

The former chief of Goldman Sachs’ asset-management arm blamed the grim market outlook on years of carefree government spending and artificially low interest rates. Those policies inflated asset prices and the federal debt, putting the economy on track for a painful downturn and a cash crunch, he argued.

“We’ve pulled forward demand because of very inappropriate fiscal and monetary policies, and ultimately a price is going to be paid,” Cooperman said.

The veteran investor predicted stubborn price increases would force the Federal Reserve to keep hiking interest rates. The US central bank has already lifted them from near zero in March to upwards of 3% today, and signaled they could approach 5% next year.

“We’re probably facing continued high inflation, higher interest rates,” Cooperman said. “I don’t think the Fed or I have any idea where interest rates have to go to curb the economy.”

He added that rising rates and other growth headwinds would cause the US economy to shrink next year.

“The combination of Fed tightening, QT, strong dollar, and the price of oil will create a recession in the second half of 2023,” Cooperman said, using an acronym for “quantitative tightening”, or reducing the money supply.

Read more: Goldman Sachs: These 20 stocks are boosting shareholder returns by aggressively buying back their shares, even as a recession gets more likely

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