Leon Cooperman expects stocks to slide this year, and is worried about soaring national debt.
Stocks are already pricing in strong earnings and an improving economic outlook, he said.
The billionaire investor thinks Tesla CEO Elon Musk, the world’s richest person, is overpaid.
Stocks look expensive and are likely to drop this year, the national debt is a ticking time bomb, and Elon Musk is overpaid, Leon Cooperman said.
“When you look at everything going on in the world and you see the market multiple at 21 times, it seems too rich to me,” the billionaire investor told CNBC Tuesday.
He was referring to the price-to-earnings ratio of the S&P 500, which surged 24% last year and has climbed another 4% to record highs this year.
Cooperman, who converted his Omega Advisors hedge fund into a family office in 2018, noted the stock market defied bearish forecasts last year.
“Everybody is now positive, and so my guess is that by the end of the year, maybe we will go down,” he said, advising investors to take a “cautious view.”
The former chief of Goldman Sachs’ asset-management division shrugged off recent earnings beats by companies such as Meta and Amazon, saying stocks were already pricing in strong corporate profits and an improved economic outlook.
Fears of a downturn have faded this year due to robust growth and employment data, inflation dropping below 4% in recent months, and the Federal Reserve signaling it might lower interest rates soon after raising them from nearly zero to over 5%. Cooperman suggested the central bank could cut two or three times this year.
“I’m not calling for recession, but I’m saying that I think the market discounted the good news,” he said. “We’ve borrowed from the future and that’s why the market has done well.”
The veteran investor warned the government debt, which has swelled from $23 trillion to a record $34 trillion within the past decade, was “out of control.”
“Nobody knows when the stuff is going to hit the fan,” Cooperman said. “Either it doesn’t matter or one day it will matter, and I think it will matter one day.”
Cooperman also took aim at Musk’s pay, after a Delaware judge struck down the Tesla CEO’s $55 billion pay plan from 2018.
“He’s a genius but he’s overcompensated,” Cooperman said about the only person on the planet with a net worth over $200 billion, per the Bloomberg Billionaires Index.
He invoked Warren Buffett’s quote that compensation consultants should go by the name “Ratchet, Ratchet & Bingo” as they’re always raising executive pay.
Cooperman’s latest outlook is hardly sunny, but it has brightened since October, when he told Business Insider he expected a recession as well as further interest-rate hikes to combat stubborn inflation.