Billionaire CEO and chairman of Omega Advisors, Leon Cooperman, cautioned on Wednesday that although the U.S. economy seems stable for now, there’s a looming threat of a recession by 2024.
He pinpointed inflated energy prices and the effects of quantitative tightening as potential triggers for the predicted downturn.
Discussing the Federal Reserve’s continuous rate increases on “The Claman Countdown” and how they might counteract the inflation-driven commodity price surges, Cooperman acknowledged the impact of quantitative tightening on the economic horizon.
“We might see a recession next year, resulting from factors like QT, oil prices, a robust dollar, and Fed interventions,” he stated. However, he quickly added, “We aren’t facing a recession, and the immediate likelihood of one remains low. The economy stands strong.”
Cooperman criticized both major political parties for the current economic stagnation. He highlighted the Democrats, under President Biden, for their hefty spending amidst rising inflation. Yet, he also drew attention to the Republicans and former President Donald Trump for operating on a $1 trillion deficit during high employment.
He also mentioned that ongoing conflicts in places like the Holy Land and Ukraine have further tangled the economic scenario.
Even though Cooperman sees potential in certain stocks, he expects the S&P 500 index to remain stagnant for an extended period.
To emphasize his perspective, Cooperman drew a parallel with the Biblical tale of Joseph interpreting Pharaoh’s dreams. Pharaoh dreamt of seven robust cattle by the Nile getting devoured by seven frail ones and seven lush ears of corn being overtaken by seven parched ones.
“This dream, found in the Bible, as deciphered by Joseph, suggests a cycle of seven prosperous years followed by seven challenging ones. Our aggressive fiscal approach reminds me of this,” Cooperman commented.
He elaborated, “The forward pull in demand means we’re either heading into a fiat currency era or the government will have to address the deficit. If it’s the latter, it will negatively impact corporate gains and overall economic progress.”
Cooperman warned of potential market selloffs due to the Fed’s stringent measures against inflation.
Illustrating the soaring inflation rates, Cooperman shared personal anecdotes. While the host, Claman, recounted her reluctance to buy a $17 smoothie, Cooperman expressed astonishment at the $56 price tag on a Yankee Stadium hat for his grandchild and the $13 pretzels, reminiscing about the “two-for-a-nickel” pretzels from his youth in the Bronx.