Leon Cooperman’s Optimistic View of the US Economy
Leon Cooperman on the US economy
In the previous article, we saw that billionaire investor Leon Cooperman shared his views on the recent market decline and the factors that are affecting the market’s movement. In this part, we’ll look at his view of the US economy.
During his February 7 interview with CNBC’s Halftime Report, he noted that the week’s decline in the stock market had “nothing to do with economics.” He added, “The economy is performing better. Earnings are performing better.”
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As the equity market (SPX-INDEX) showed a huge swing in the week ended February 9, many analysts believe the expectation for an aggressive Federal Reserve is a primary cause of the whiplash. Some market participants expect that global growth has peaked, which is hampering investors’ sentiment.
US economic growth
As Cooperman noted during the CNBC interview, the US economy (SPY) (QQQ) is doing well. The economy grew at an annualized rate of 2.6% in 4Q17, according to data provided by the Bureau of Economic Analysis. Overall, the US economy posted a growth rate of 2.4% in 2017, which is much higher than the 2016 growth rate of 1.5%.
Similarly, US personal income, wage growth, and labor market conditions improved strongly in 4Q17. These factors signal a positive trend in the US economy.
Earnings growth is also improving. Since 3Q16, we have seen a strong and gradual improvement in the earnings growth of the component companies of the S&P 500 Index (SPX-INDEX).
Cooperman believes these factors are a positive influence on the US economy. He noted during the February 7 CNBC interview that the huge fluctuation in the market movement (COMP-INDEX) was mostly due to what he called “crazy” volatility-related derivatives and securities.
He added, “The S&P does not deserve to trade up or down 100 points in a half hour. It’s crazy. It creates casino mentality.”
In the next part of this series, we’ll analyze Cooperman’s view on several investment ideas.