Billionaire investor Leon Cooperman has warned that the US economy could slip into a recession sometime next year, saying the current strength in stocks and the wider economy may be masking growing risks.
“I think that we’re going to have a recession sometime next year, and that will probably bring the market down,” Cooperman, CEO of Omega Advisors, told CNBC. He also said he believes earnings expectations for the S&P 500 are too high and remains negative on markets, particularly technology stocks.
Inflation could become a bigger problem
One of the biggest risks, according to Cooperman, is rising inflation. Oil prices have climbed sharply, with Brent crude trading around $89 a barrel and remaining about 22% above levels before the start of the Iran war.
Higher oil prices could push inflation higher and put further pressure on US consumers. There are already signs that households are becoming more cautious. US retail sales fell 0.6% in July, against expectations for a 0.1% increase, according to the Commerce Department.
If inflation stays high, the pressure on consumers could increase while markets could also face a fresh challenge from higher costs and tighter financial conditions.
AI boom could add to market risks
Cooperman is also concerned about the strong rally in technology and AI-related stocks. While investors remain optimistic that massive spending on artificial intelligence will eventually generate strong returns, he believes the current enthusiasm could fade.
The Nasdaq 100 is still on track for another year of double-digit gains and has risen about 19% since January. Cooperman believes those expectations may not be realistic, leaving stocks vulnerable if earnings fail to match the optimism already priced into markets.
‘The three most dangerous words in investment land’
Cooperman compared the current market with the Nifty Fifty era, when a group of large, popular growth stocks surged before eventually collapsing in the 1970s.He warned that rising oil prices and inflation could create a similar problem for today’s high-growth stocks. “The three most dangerous words in investment land vocabulary are: ‘It’s different this time,’” Cooperman said. He also pointed to the unusually bullish mood among investors and warned that sentiment could change quickly if markets face a major negative catalyst.
US growth remains strong for now
The recession warning comes even as the US economy continues to show resilience. Atlanta Fed economists currently expect GDP to grow at an annualised 4.3% pace in the third quarter. This puts Cooperman in the minority on Wall Street, where most investors remain confident about AI spending, corporate earnings and the broader economy. However, Cooperman has maintained his bearish view for some time. Earlier this year, he said the US could enter a recession as soon as late 2026 and compared the current market with previous periods of excessive optimism.