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Leon Cooperman warned that the huge hype surrounding Nvidia and other growth stocks is dangerous.
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The billionaire investor predicted that the S&P 500 would not hit a new high for several years.
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Pressure on consumers and the Fed’s interest rate hike could trigger a recession in 2024, he said.
Leon Cooperman denounced the speculative mania around Nvidia and other popular stocks, and warned that the US economy could slide into recession next year.
“We know Nvidia isn’t going to end well,” the billionaire investor said during an interview at Ben Graham’s 10th Annual Conference on June 20.
Nvidia shares have nearly tripled in price this year, taking its market capitalization to a record $1 trillion, as investors bet the microchip maker will be a big winner in the artificial intelligence boom.
“I’ve learned over the years that everything eventually turns to shit, and falling 200 times earnings is a lot harder than falling eight or nine times earnings,” Cooperman said, referring to the Nvidia’s current valuation. He noted that former stock market darlings like Cisco never recovered from the breathless highs they reached during the dot-com bubble.
The founder of Omega Advisors, and former head of the asset management division of Goldman Sachs, lamented the general state of madness in which investors find themselves today.
“There are a lot of crazy things happening in the market,” he said. “I’ve never seen moves on news as insignificant as what we see in the market today,” he continued, blaming the volatility in part on quantitative traders who “know all about pricing. , know nothing about value”.
Cooperman attributed the rally in stocks this year – the S&P 500 soared 15%, while the Nasdaq 100 jumped 38% – to a sharp uptick in positive sentiment, not to fundamentals such as higher earnings for businesses.
He warned that the enthusiasm would not last and predicted that the S&P 500 would not surpass its January 2022 high of around 4,800 points for several years. However, he noted that there are still plenty of undervalued stocks in the market today, paving the way for bargain hunters to fetch outsized returns.
Cooperman also touched on the U.S. economic outlook, suggesting a recession could hit in 2024.
“If we have one, it could happen next year when people run out of money and the Fed keeps raising rates,” he said.
The seasoned investor added that he was behaving cautiously amid overvalued assets, persistent inflation, rising interest rates and an impending economic slowdown.
“I’m nervous enough about the big picture that I’m not fully invested, I have money,” he said. “But I would say there is no shortage of good values.”
Read the original article on Business Insider