Soaring oil prices or the policy tightening by the Federal Reserve could send the US into recession in 2023, billionaire investor Leon Cooperman said. “It's not written in stone, but that would be my guess," Cooperman told CNBC on Tuesday.
The former hedge fund manager joins a number of Wall Street titans and investment banks that have raised concerns over the Fed’s withdrawal of support from the US economy and aggressive plan to hike interest rates to curb inflation, saying it could slow down growth and lead to recession.
On Tuesday, Deutsche Bank became the first major lender to predict that the US economy would fall into a recession in late 2023 as the Fed raises interest rates sharply. The bank analysts said historically, the Fed has triggered recessions whenever it raised interest rates to tackle inflation.
Last month, billionaire Carl Icahn warned investors of a recession “or even worse” in the days to come. DoubleLine Capital’s Jeff Gundlach said inflation could touch 10 percent in April, forcing the Fed to hike interest rates at an unsustainable pace, tipping into a recession.
“I think the Fed has totally missed it and I think we have a lot of wood to chop,” Cooperman said.
The Fed raised its benchmark interest rate in March for the first time since 2018 to check soaring commodity prices set off by Russia’s invasion of Ukraine. The central bank has warned of another six hikes this year and three in 2023. Federal Reserve Governor Lael Brainard recently said the central bank could hike rates more aggressively to dampen the high rate of inflation.
Cooperman criticised the Fed for its delayed response to rising consumer prices, calling it the “most irresponsible package of fiscal, monetary policies” in the history of the US.
The CEO of Omega Advisors warned of difficult times ahead as a result of borrowing from the future.
Although stock investors reap gains in the near term from inflation, the rising prices become a problem when the Fed acts to combat it, he said.
“Investors understand curbing inflation is tantamount to curbing growth,” Cooperman said.
The veteran investor cautioned investors of a bear market that typically precedes recession and asked them to protect their portfolios in the midst of rising market risks.
“In a bear market, he who loses least, wins,” Cooperman said.
