Leon Cooperman is not known for measured statements. Whether it’s calling Bill Ackman stupid to his face or planning to yell at Hillary Clinton to her face or writing angry letters to the president of the United States or throwing a fit if a house guest fails to hand-wash a water glass or working until he’s deadout of spite, this is not a man known for half-measures, verbally. And yet, when asked about the prospect of imminent financial collapse under the leadership of a man to whom he preferred the aforementioned Clinton, he’s got a pretty mild take.
"The market's not cheap, but it's not expensive ... it's approaching normalization," said the hedge fund manager.
"The conditions that normally lead to a big market decline ... just aren't present," he added.
Cooperman explained that in his 50 years doing this shit, he’s learned what precedes a market crash. And inflation isn’t accelerating, a recession isn’t oncoming, the Fed isn’t hostile and there hasn’t been “some kind of significant geopolitical event.”
One might say old Coop’s pretty sanguine about the latter two, since they seem to be significant probabilities at the moment. But no matter, because he’s even more sanguine about something else.
Cooperman said his fair value for the market is about 17 times forward earnings. If President Donald Trump is able to pass his tax reform plan, Cooperman says he projects $150 in S&P 500 earnings per share next year. This results in a forecast of 2,550 for the benchmark index, which is roughly flat to Monday's close.
In other words, the market is fairly valued for a post-tax-reform world. Which is great except that it’s not the current world in which said market valuation resides, and one that may never come to pass.
Mr. Trump’s shutdown of the proposal is the first of what many Republicans privately fear could be a presidential pattern that disrupts their efforts to pass a sweeping overhaul of the tax code. In it, Mr. Trump appeared to rule out a politically difficult idea, which, if enacted, would have provided some revenue to help pay for the tax plan.
No matter, really, as Coop seems to think the markets have already priced the success of said tax plan in and won’t move an inch should it actually succeed.
"Most bull markets end in overvaluation. I don't think we're overvalued," Cooperman said, and "we have another 10 to 15 percent to go for that to occur."