Cooperman Doesn’t Think Conditions for Big Market Drop Are Present
Leon Cooperman on the market decline
In October 2017, the S&P 500 Index (SPY) (QQQ) made gradual record highs. It broke an important resistance level on October 27, 2017, and touched a record high of $2,582.98. In the previous part of this series, we discussed that Leon Cooperman thinks the market is neither cheap nor expensive.
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He also added, “the conditions that normally lead to a big market decline just aren’t present.” According to him, there are four conditions required to enter a bearish market: “accelerating inflation, oncoming recession, hostile Fed, and some kind of significant geopolitical event.”
Inflation is improving and gradually reaching the Fed’s target level. The Fed’s 2% inflation target level is good for the economy. If the Fed becomes too aggressive or starts to tighten the interest rate at a faster pace, then it could also affect the demand side of the economy. However, a gradual rate hike is appropriate when an economy shows a stronger move. If a significant geopolitical event (ACWI) occurs, investor sentiment could turn bearish.
In the present situation, the Fed is tightening its key interest rate gradually. Although tension between the US and North Korea is present, we might not see a big market decline as a result.
In the next part of this series, we’ll analyze Leon Cooperman’s view on President Donald Trump and his administration.