Super-investor warns of a crash: "These are the three most dangerous words in the world of investing"

Leon Cooperman, the billionaire investor, a pioneer of the hedge fund industry and a former senior executive at Goldman Sachs, has returned with a sharp warning for investors.

According to Cooperman, the American economy could enter a recession during the coming year, and declines in the stock market could follow.

In an interview with CNBC, Cooperman said that he identifies similarities in the markets to previous boom and bust cycles and estimates that the current growth cycle is nearing its end.

"I think we are likely to enter a recession sometime next year, and that will probably lead to declines in the market," he said.

According to him, current earnings forecasts for the S&P 500 are also mispriced.

The warning comes precisely when economic data remains strong: economists at the Federal Reserve Bank of Atlanta forecast growth of 4.3% in US GDP in the third quarter. At the same time, S&P 500 company profits are expected to grow by more than 50% compared to the same quarter — the fastest pace since the stock boom during the coronavirus period.

However, Cooperman believes that investors are ignoring a significant risk: a resurgence of inflation. He is mainly concerned about energy prices, as Brent crude oil is trading around 89 dollars a barrel, about 22% above the level before the outbreak of the war with Iran.

Cooperman compares the current situation to what happened to the "Nifty Fifty" stocks in the 70s, when large growth companies crashed against the backdrop of a sharp rise in oil prices.

"The three most dangerous words in the world of investing are: ‘This time it’s different’," he said.

Cooperman admits that he is in the minority on Wall Street. While most investors continue to believe in the potential of artificial intelligence and in the return on huge investments in the field, he says that he is "pessimistic" about the markets and especially avoids technology stocks.

"It is interesting to me that everyone is optimistic," he said. "They sell stocks every time a negative announcement is published."

Cooperman is considered one of the most prominent pessimistic investors on Wall Street in recent times. In a conversation on Fox Business earlier this year, he pointed to a similarity between today's market and market bubbles of the past, and said that he sees a recession hitting the US as early as late 2026.