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Think the Stock Market Is Out of the Woods? These Billionaires Disagree

Last Updated September 23, 2020 1:52 PM
Joseph Young
Last Updated September 23, 2020 1:52 PM
  • Carl Icahn expects the U.S. stock market to see short-term downtrends in the coming weeks.
  • Billionaire investors are seeking cash and safety as the coronavirus pandemic raises economic uncertainty.
  • Medium to long-term trend remains optimistic, as investors focus on “real economy” stocks, not tech.

Some of the wealthiest investors in the U.S., like Mark Cuban and Paul Tudor Jones, have warned that the stock market will test recent lows in the near-term. Add Carl Icahn, whose net worth exceeds $21.5 billion , to the list. He expects a pullback to hit the markets soon.

The U.S. stock market has been relatively stable in the last three weeks, as investors cautiously observe the government’s actions of reopening the economy by May.

Icahn Warns of “Big Short-Term Downtrends” in the Stock Market

From its highest point of the year, the U.S. stock market dropped by nearly 36 percent as the Dow Jones Industrial Average plummeted from 29,200 points to as low as 18,591 points on March 23.

stock market
U.S. stock market has recovered from March 23 lows but remains fragile. | Source: Yahoo Finance

Unprecedented levels of volatility  spilled over the stock market and affected virtually every other asset class, including precious metals.

Speaking on Bloomberg Markets: The Close,  Icahn said that his firm Icahn Capital Management suffered as “even the hedges couldn’t stop us from losing some money.”

Icahn noted that opportunities would arise out of the crisis, but in the short-term, he emphasized that big downtrends are about to hit the stock market.

He said:

While you have to be extremely careful in this market… I think there will be some good opportunities. But, I cannot talk about it in the short-term. Short-term, I think you may have some big downtrends, so that is where I am with that.

When asked about the March 23 bottom of the U.S. stock market and if it could potentially go further down, Icahn indirectly suggested that stocks could revisit the lows.

The investor, who works with medical experts and doctors through the Icahn School of Medicine at Mount Sinai, expressed grave concerns about the contagiousness and the severity of coronavirus.

Icahn said that coronavirus could be recurring and happen in spurts, which could affect the recovery of the stock market.

Icahn added:

I think this thing [coronavirus] is going to be in spurts, but I do think, it’s a great country, and with a lot of misgivings I have, I think you will see some great opportunities ahead.

If the U.S. economy and the stock market demonstrate a proper rebound in the medium to long-term, Icahn said that the so-called “real economy” stocks, not tech stocks, would benefit the most.

High Net Worth Investors Cuban, Tudor Jones Echo Similar Sentiment

A growing number of investors in the U.S. are flocking to cash and safer alternatives out of rising skepticism towards the comeback of the stock market.

On April 8, on CNBC’s Closing Bell, Cuban noted that investors are being naturally optimistic, but are struggling to price in  what may happen “on the other side.”

Paul Tudor Jones, founder of Tudor Investment and JUST Capital, similarly said on Squawk Box that stocks could retest its lows  until the coronavirus outbreak in the U.S. hits its peak.

The common theme among billionaire investors is that while the short-term trend of the stock market seems bearish, in three to four months, the market is likely to be in a solid recovery phase.