Leon Cooperman said he expects the Federal Reserve to raise interest rates another quarter-point at its meeting this week as it tries to quell the turmoil engulfing the banking industry.
(Bloomberg) — Leon Cooperman said he expects the Federal Reserve to raise interest rates another quarter-point at its meeting this week as it tries to quell the turmoil engulfing the banking industry.
“They’re going to accept a higher level of inflation than they would like to accept because of the stress in the financial system,” Cooperman, founder of New York-based Omega Advisors, said Monday in an interview on Bloomberg Television. “They have to stabilize the Treasury market, because the volatility of bonds is so great that it’s destabilizing equities.”
Cooperman, 79, who converted his hedge fund firm into a family office in 2018, said the crisis involving some US regional lenders is the unsurprising result of years of easy money by central banks. The upheaval began earlier this month with the collapse of Silicon Valley Bank and continued through the weekend as UBS Group AG agreed to buy Credit Suisse Group AG after a crisis of confidence at the stricken lender.
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“We have a self-induced crisis by irresponsible fiscal monetary policy over the last decade,” Cooperman said. “We’re getting a predictable response by government.”
Still, he said regulators should do everything possible to stabilize the financial system, including embracing US Senator Elizabeth Warren’s call for the FDIC to insure accounts exceeding $250,000 and for banks to fund the extra costs.
“There’s very little that Elizabeth Warren says that I agree with, but I think we have to do whatever we have to do,” Cooperman, a major donor to Republican candidates over the years, said of the Massachusetts Democrat.
Cooperman, who predicted as recently as February that the US economy is heading for recession, said last year’s S&P 500 high of about 4,800 will “stand for some time.”
“We are in a stock-pickers environment, and I expect returns to the S&P to be very pedestrian,” he said.
Cooperman said his largest exposure is to energy stocks that “have cost me some money this year,” but thinks that an surge in travel and China easing its lockdown restrictions will boost demand. He said he’s also considering investing in mortgage REITs.
–With assistance from Lisa Abramowicz.
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