Leon Cooperman offered advice Sunday to investors who are trying to navigate the stock market’s volatile reaction to the coronavirus, stressing the importance of avoiding panic.
The billionaire investor and founder of Omega Advisors shared his guidance as stock futures fell Sunday, indicating a lower open Monday as investors continue to show concern around the coronavirus’ impact on the global economy.
Don’t buy on margin, “just know what you own and be patient,” Cooperman said on CNBC’s special program, “Markets in Turmoil.”
Cooperman said he had strong faith in the ability of health officials across the globe to eventually contain the virus.
“It will be contained sooner than one thinks. The economy will definitely be hurt, but I think we’ll avoid a recession and some of this demand is deferred, not obliterated,” he said.
Margin trading is a process by which traders borrow money from a brokerage firm to make an investment. CNBC’s Jim Cramer also told investors last week to avoid margin trading, despite the temptation to take advantage of lower stock prices.
“If you don’t have a decent amount of cash on the sidelines, you shouldn’t do any buying here,” Cramer said then.
The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all declined more than 10% last week, their largest weekly drop since October 2008. The indexes ended the week in correction territory, meaning they were more than 10% from their record highs that were recorded in February.
Cooperman’s call for investors to be patient come as amount of coronavirus cases continues to spread across the globe, numbering more than 85,000 as of Sunday night.
There also are more than 2,900 deaths, and over the weekend Australia, Thailand and the U.S. reported their first coronavirus-related deaths.
‘Uninformed optimist’
Cooperman said he considered himself “an uninformed optimist,” but said investors who take a more bearish view on the coronavirus’ economic impact should respond accordingly.
“If you believe it’s going to be out of control and we’re going to be in a recession, step aside because the market will go lower,” he said.
Cooperman also repeated his belief that Bernie Sanders’ rise in the Democratic primary poses a serious risk to the stock market. He previously said the Vermont senator presented a greater threat to stocks than the coronavirus, calling Sanders on Feb. 18 a communist.
Sanders identifies as a democratic socialist.
While Cooperman said much of the market’s recent tumult was likely attributable to the coronavirus, he said he believes investors will turn their focus to the presidential election eventually.
“When they get finished with the virus, they’ll go to politics,” Cooperman said Sunday.
Cooperman said he believed the Federal Reserve was likely to cut interest rates in response to the coronavirus, but suggested another course of action would better stabilize the market.
“If you ask me: cutting the rates or reinstating the uptick rule? I say reinstate the uptick rule,” Cooperman said. “Rates are already low enough.”
Put in place by the Securities and Exchange Commission in 1938, the uptick rule prevented short sellers from placing added pressure on a security that was already slumping.
The rule was eliminated in 2007 as electronic trading began to take over Wall Street.
Cooperman said reinstating the rule would prevent some of the volatile market moves that took place Friday.
“In the last hour on Friday, the S&P 500 moved like 100 points,” he said. That’s not related to economics.”
