Leon Cooperman On Why The Markets Aren't Overvalued And It Would Be Negative If Fed Doesn't Raise Rates

Whereas most market participants are worried about interest rate hikes, billionaire investor and chairman of Omega Advisors, Leon Cooperman, feels a rate hike in September or Decemebr isn’t of much significance.

Cooperman was on CNBC Monday to discuss the current state of the market and when Fed will be raising rates.

‘Seems About Right’

“I think the market is in a zone of fair and full valuation,” Cooperman said. “I don’t think it’s overvalued, it’s not priced to perfection. If I thought there was something overvalued, I’ll have to say I think it’s the bond market is overvalued, but stock market is about 16.5 times earnings and seems about right.”

Rate Hike: Insignificant

Cooperman was asked about when he thinks Fed will start raising rates. He replied, “Probably September or December and I fail to see the significance. I am kind of the viewpoint that it’s more negative if the Fed doesn’t move because it says something about the condition of the economy.”

“So, if historically if you look at the market versus interest rate cycle, on average after the first Fed rate hike, the market didn’t peak for 30 months and the shortest period of time when the market peaked before [the] rate hike was 10 months, okay?”

He continued, “And on average the first Fed rate hike, the market a year later was 9.5 percent higher than it was at the first Fed rate hike. So, I think all this preoccupation about the Fed is so much miss-directed.”

Bear Markets

According to Cooperman bear markets come about for one of four reasons- 1) stock markets start to decline in anticipation of a recession, 2) the stock market gets overvalued, 3) a geo-political event that shocks the market, and 4) the Fed gets hostile. Cooperman feels that none of these four reasons are currently present for a bear market to occur.