The biggest names in finance now believe that stocks are currently overvalued. A view that seemed unlikely to come from them a couple of weeks ago.
The latest to weigh in on the issue are legendary investors, Stan Druckenmiller and David Tepper, who think that the risk-reward of holding on to shares is the worst that they have faced in years.
Druckenmiller called a V-shaped recovery, which is the idea that the company will immediately bounce back after the pandemic, a fantasy. Tepper, on the other hand, thinks that the overvalue is the most he’s ever seen since 1999.
Other Wall Street managers are also catching on to this notion. Investors are starting to suspect that the support from the Federal Reserve and the Treasury stimulus worth $3 trillion may not be enough as the country grapples with increasing unemployment, bankruptcies, and more.
Fund managers Paul Singer, Bill Miller, and Paul Tudor Jones have all expressed their doubts about the economy and the market, specifically.
The bear market contrasts the optimism that spurred the S&P 500 index up by around 26% following a dip in March.
The warnings have caught the attention of U.S. President Donald Trump, who went on a Twitter “attack” against the so-called “rich guys.” He told them to remember that some are betting against the stock market and those who will be making money once it simmers down.
Economists and investors are forecasting further declines as the country struggles to revive the economy.
In a speech delivered around the same time that Trump’s tweet was posted, Jerome Powell, Federal Reserve Chair, described a doom-laden situation with unemployment and mass bankruptcies. He said that policymakers should step up more to prevent a possible long-term economic loss.
Interestingly, Tepper’s comments have changed wind compared to late March. At that time, he said he was pondering on buying into health care and technology companies.
As for Druckenmiller, he has revealed at the Economic Club of New York that the liquidity that once drove markets up will soon shrivel. This may be because the Treasury’s borrowing has been crowding out the private economy. He said that he has never seen a time like this when the risk of owning stocks outweighs any potential gain.
Billionaire Leon Cooperman has predicted that there will be higher taxes and more regulations because of the government’s actions.
The 77-year-old financial expert has revealed that this cycle is different from the seven other bear markets he has experienced in his life. Mainly because in this cycle, most of the economy was shuttered.
However, Cooperman thinks that this decision was one of the bad ones. He warns that there might be a higher risk of an economic depression coming if the larger economy remains shut.