Bulls Stand Back: Iconic Investor Cooperman Broadly Bearish, Likes Microsoft

Some investors have gotten excited with the market's recent rebound, but the prominent investor Leon Cooperman has reservations.

With the S&P 500 having rebounded 13% from its October low, some market participants say a new bull market is upon us.

Legendary Wall Street investor Leon Cooperman, who made his name at Goldman Sachs, begs to differ.

“I don't think the market is going to be anywhere near a bull market,” he said in an interview with TheStreet.com columnist Doug Kass that appeared on TheStreet’s Action Alerts PLUS. “I think 4,800 high in the S&P 500 will be the high for a number of years.” The index hit that peak Jan. 3, 2022.

But he did cite some sectors and individual stocks that he likes. Those include energy stocks, Alphabet  (GOOGL) - Get Free Report, Microsoft  (MSFT) - Get Free Report, Motorola Solutions  (MSI) - Get Free Report and Canadian oil company Paramount Resources  (PRMRF) . 

So what makes Cooperman a bear overall? “I think we have borrowed from the future because of excessively stimulative policies, both monetary and fiscal,” he said.

The Federal Reserve kept interest rates at historical lows from the financial crisis of 2008 until the rate-tightening campaign that began in March 2022. And the federal government injected $5 trillion of stimulus into the economy to fight the pandemic.

Cooperman Concerned About Government Debt

Cooperman is concerned about the government’s burgeoning debt. In 2017 it totaled about $20 trillion, and now it’s $31 trillion.

“That's a growth rate in debt far in excess of the growth rate of the economy,” Cooperman said. “That's got to be serviced, .. and it's going to be financed by people like you and me through higher taxes.”

Another reason for Cooperman’s bearishness on stocks: “I think for the next 12 months, we're facing continued high inflation,” he said. “I think we're lucky to get inflation down to 4%.” The consumer price index rose 6.5% in 2022.

About 65% of the costs at a typical business is labor, and those costs aren't “likely to moderate dramatically,” Cooperman said. Average hourly earnings climbed 4.6% in 2022. “I think labor has the upper hand at the present time,” he said.

In addition, “Fed Chairman Jerome Powell has been too accommodative, and the problems are not just created by the Ukraine war,” he said.

Cooperman Sees High Interest Rates

Another negative factor for stocks: “I think we're going to be focused on high and possibly rising interest rates,” Cooperman said.

The federal funds rate currently stands at a range of 4.25% to 4.5%. Fed officials forecast in December that the rate would rise to 5% to 5.25% this year, though interest-rate futures investors have predicted 4.75% to 5%.

The U.S. suffers from a lack of leadership, Cooperman said. “Fortunately, we will get leadership one day in this country, but the leadership will come when we get into a crisis,” he said.

“We're not in a crisis now, and we're going to get leadership out of a crisis, but the financial markets don't discount a crisis.”