Leon Cooperman: I Am Less Bullish on Stocks Now

Friday, 26 Oct 2012 12:13 PM

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Omega Advisors hedge fund founder Leon Cooperman, a noted stock champion, is not as bullish on stocks these days, though he stops short of saying he’s turning bearish.

Equities might be due for a breather, at least from their gains.

“I think the stock market presently is fairly valued,” Cooperman told CNBC’s The Kudlow Report.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

“I believe the profit cycle is peaking.”

Stocks have been a good investment over the last 50 years and they still are, though the economy appears to be entering a period of slower growth, which means investors will pay less of a premium for stocks.

“I’m not aggressively bullish or bearish ... I’m simply saying I think the market is now fairly valued.”

Still, investors shouldn’t sell their stocks and run and hide out in safe-haven assets.

The Federal Reserve has cut interest rates to near zero and says they will stay there for some time.

The Fed also recently announced plans to buy $40 billion in mortgage-backed securities held by banks every month until the economy and labor market improve, a monetary policy tool known as quantitative easing (QE).

The announcement marks the third time the Fed has rolled out QE measures to jolt the economy since the 2008 financial crisis, with the first round seeing the Fed snap up $1.7 trillion in mortgage securities and the second round seeing the Fed buy $600 billion in Treasury securities held by banks.

QE aims to stimulate the economy by injecting the financial system full of liquidity via bond purchases that push down interest rates to encourage investing, job demand and stock market gains.

“If you must put money to work I still don’t think there’s a better alternative than common stocks — the Fed has made all the alternatives very unappealing,” said Cooperman.

The Fed recently said it would keep monetary policy loose until both the economy and the labor market show noted improvement.

“The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook,” the Federal Open Market Committee, the Fed’s rate-setting body, said in a statement announcing no change to monetary policy.

“If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability,” the Fed said in its statement.

“In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.”

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

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