Background of the Warning
Leon Cooperman, an experienced investor and billionaire, warns of an overvalued market. He sees the risk of a significant decline in stock prices. David Kotok, chief strategist at Cumberland Advisors, has calculated that tariffs could pressure the S&P 500’s earnings per share (EPS) by up to $30. Currently, the S&P 500 is often situated above around 4,000 points (as of early/mid 2025). A drop below this mark would signify a significant crash.
Why are Tariffs So Dangerous?
- Cost Increases: Higher import tariffs raise the cost of inputs and raw materials for many companies.
- Declining Profit Margins: Companies cannot always pass these costs on to customers, which strains margins.
- Chain Reaction: Falling corporate profits often lead to declining stock prices.
- Market Psychology: Negative expectations amplify selling pressure.
Possible Effects on the S&P 500
| Factor | Effect |
|---|---|
| EPS Decline of approx. $30 | Significant decrease in profits |
| Overvaluation according to Cooperman | Higher likelihood of correction |
| Potential Price Drop | Possible drop below the 4,000-point mark |
What Does This Mean for Investors in German-speaking Countries?
Many German and European investors hold ETFs or funds with US equity shares (e.g., iShares Core S&P 500 ETF). A significant crash can heavily impact their portfolios. Currency risks could additionally play a role: a weaker dollar could mitigate or exacerbate losses.
Recommendations for Investors
- Review Your Portfolio: Check your weighting in US stocks, especially in the technology sector, which may be particularly vulnerable to tariffs.
- Increase Diversification: Broaden your capital distribution across various regions and sectors.
- Consider Hedging: Options or other derivatives can help limit risks.
- Maintain a Long-term Perspective: Short-term fluctuations are normal; in the long run, quality companies remain attractive.
- Monitor Market Developments: Stay updated on trade conflicts and political decisions regarding tariffs.
Conclusion
The warnings from Leon Cooperman and the analyses from David Kotok suggest that a significant setback in the S&P 500 due to rising tariff costs is possible – with a potential crash below the 4,000-point mark. For investors in German-speaking countries, this means increased caution with investments in US markets and a careful assessment of their portfolio risks in light of geopolitical uncertainties and trade disputes.