Leon Cooperman says future stock market returns will be 'unimpressive for a long time'

Published Mon, Aug 31 20208:57 AM EDTUpdated Mon, Aug 31 20209:58 AM EDT

(This story is only for CNBC Pro subscribers ) Billionaire investor Leon Cooperman warned on Monday that long-term market returns could be lackluster because this year's incredible comeback will likely rob returns from the future. "The overall market, we've been pulling a lot of demand forward. I would expect that future returns will be relatively unimpressive for a long time," Cooperman said Monday on CNBC's "Squawk Box." Cooperman said when people realize most of the gains are because of government help, valuations for the stock market will come down. "We came into 2020 with a full employed economy, yet we were running a trillion-dollar deficit. And now we're piling a lot of debt on top of that. And so I would have to say I have a conservative view," he added. Cooperman explained that his bleak prognosis for the stock market stems from the impact of interest rates, which the Fed has kept near zero since the Covid-19 pandemic started to weigh on the U.S. economy earlier this year. The stimulative effects of that policy, in tandem with debt-fueled spending by Congress, may eventually peter out as corporations curb debt issuance and consumers lose the added benefit of boosted jobless benefits and other stimulus. The S & P 500 is up 9% this year after plunging in the wake of the coronavirus outbreak. The index is up 7% this month alone, headed for its best August since 1984. "What's driving the whole thing is interest rates," Cooperman said. "What people have to understand is that the Fed is pursuing this zero-interest rate policy not because things are good in the economy. They're pursuing a zero-interest rate policy because things are bad in the economy." Cooperman, who founded investment firm Omega Advisors in the early 1990s, turned it into a family office at the end of 2018 . He noted that the economy has had some sort of government assistance since the Great Recession. The longtime investor and former Goldman Sachs partner added Monday that he sees signs of euphoria in parts of the markets. He cited activity in the initial public offering market and acceleration of special purpose acquisition companies, or SPACs. He also criticized investors who bought Apple and Tesla on news of their stock splits and said Robinhood traders who bought shares of car-rental company Hertz, now in bankruptcy court, made Carl Icahn's sale around 75 cents look like a "mistake."

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CNBC's full interview with billionaire investor Lee Cooperman

Squawk Box

(This story is only for CNBC Pro subscribers)

Billionaire investor Leon Cooperman warned on Monday that long-term market returns could be lackluster because this year's incredible comeback will likely rob returns from the future.

"The overall market, we've been pulling a lot of demand forward. I would expect that future returns will be relatively unimpressive for a long time," Cooperman said Monday on CNBC's "Squawk Box."

Cooperman said when people realize most of the gains are because of government help, valuations for the stock market will come down.