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- Leon Cooperman thinks soaring oil prices or aggressive Fed policy could push the US into recession in 2023.
- The billionaire investor doesn’t see a downturn in 2022, and said he’s still invested in the market.
- “I think the Fed has totally missed it, and I think we have a lot of wood to chop,” he told CNBC on Tuesday.
Billionaire investor Leon Cooperman believes soaring oil prices or Federal Reserve tightening could send the US into a recession next year.
Analysts have raised concerns that the central bank’s aggressive plan for interest-rate hikes and withdrawal of support for the US economy could slow down growth, tipping it into a recession.
“I think the Fed has totally missed it, and I think we have a lot of wood to chop,” Cooperman told CNBC on Tuesday. “I would think the price of oil or the Fed would push us into a recession in 2023. It’s not written in stone, but that would be my guess.”
The US central bank in March raised interest rates for the first time since 2018 to try to tackle inflation, which is running at 40-year highs. It has flagged another six hikes this year and three in 2023, but Fed Governor Lael Brainard’s hawkish comments Tuesday suggested a possible faster pace of tightening.
“We’ve had the most irresponsible package of fiscal, monetary policies in the history of the country. And we have borrowed for the future — it is a price we pay for what we have done,” Cooperman said.
The Omega Family Office CEO said the Fed wouldn’t be able to engineer a “soft landing” for the economy from its rate hikes and cuts to its balance sheet, which it has yet to lay out in detail.
“Inflation becomes a problem when the central bank is moving to curb inflation, because investors understand curbing inflation is tantamount to curbing growth,” he said.
“Recession is typically preceded by bear markets,” he added. “So I think it’s a time for caution.”
The Omega Family Office CEO said he doesn’t expect a downturn in 2022, and he is still invested in value stocks. Value stocks are those of companies whose health is more closely linked to the economy and interest rates, which typically look cheap when financial performance is taken into account.
“Inflation, historically, has been a friend of common stocks,” he said.
Cooperman said he was 68% net long right now — that is, he has more long positions than short positions — and 20% of his portfolio is in energy.
The billionaire investor said he has made a 6% year-to-date return from his exposure to energy stocks, which he said are cheap relative to commodity prices.
Surging energy prices are adding to worries about inflation, with crude oil prices rising to 14-year highs in March, thanks in part to the potential supply squeeze from sanctions on Russia over its war on Ukraine. Brent crude futures were up 1.5% to trade at $108.22 a barrel at last check Wednesday, while WTI was 1.7% higher at $103.66 a barrel.
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