Steve Cohen Warns You Can't DOGE a Significant Market Correction
Billionaire investor Steve Cohen doubled down on his negative view of the U.S. economy due to a backdrop of punitive tariffs, immigration crackdown and federal spending cuts spearheaded by the so-called Department of Government Efficiency.
The chairman and CEO of hedge fund Point72 said he turned bearish for the first time in a while after President Donald Trump’s aggressive trade policy made him worry about inflationary pressures and lower consumer spending. Meanwhile, his tough stance on immigration could mean a constrained supply of labor, he said.
“Tariffs cannot be positive, okay? I mean, it’s a tax,” Cohen said Friday at the FII Priority Summit in Miami Beach, Florida. “On top of that, we have slowing immigration, which means the labor force will not grow as rapidly as … the last five years and so.”
The prominent hedge fund investor took a stab at DOGE’s cost-cutting moves led by Elon Musk, saying they could only hurt the economy more. Musk has said his goal is to cut federal spending by $2 trillion.
“When that money has been coursing through the economy over many years, and now, potentially it will be reduced or stopped in many ways, has got to be negative for the economy,” Cohen said.
Cohen believes a pullback in the stock market could be likely given the uncertain macroeconomic environment. He sees the U.S. economy’s growth slowing down to 1.5% from 2.5% in the second half of the year.
“I think we’re seeing the regime shift a little bit. It may only last a year or so, but it’s definitely a period where I think the best gains have been had and wouldn’t surprise me to see a significant correction,” Cohen said. “I don’t think it’s going to be a disaster.”
Steve Cohen is following Ken Griffin in warning tariffs aren't good for the US economy and neither are drastic cuts in the federal civil service.
This is all Economics 101 to most economists, tariffs are inflationary and fiscal retrenchment isn't good for overall spending given that consumption makes up 69% of nominal US GDP.
More inflation, less economic growth means stagflation lies ahead and this is why elite money managers are sounding the alarm.
But Donald Trump oversaw the swearing-in of his new top tariff official on Friday afternoon, confirming a plan that will likely consider digital service taxes as akin to tariffs, and again promised to impose reciprocal tariffs "soon."
The comments capped off a week of trade threats from the Oval Office even as evidence emerged that Americans are growing wary that new duties could be reflected in their prices.
No kidding, with Americans paying as much as $10 for a carton of eggs because of a bird flu outbreak and owing a record $1.21 trillion on their credit cards, they're wary of tariffs and fiscal retrenchment.
And while they are managing their credit card debt, an abrupt shift in the economy can spell big trouble ahead.
No wonder US consumer sentiment plunged over tariff and inflation fears on Friday and this too doesn't bode well for the economy:
Inflation is picking up again and President Donald Trump said this week it’s all his predecessor’s fault. But no matter who Trump blames for inflation, America’s economic mood is now souring — and Trump is getting the heat for it.
The University of Michigan’s latest survey, released Friday, showed that US consumer sentiment declined in February for the second consecutive month, according to a final reading, down by a steep 10% from January. That was double the decline initially reported earlier this month.
It’s a stunning about-face after American consumers and businesses grew hopeful (briefly) about the economy’s future following Trump’s election in November. The latest decline in consumer sentiment was driven by worries over Trump’s tariffs potentially jacking up prices.
A new CNN poll released Thursday similarly showed pessimism on the rise because of prices: Nearly two thirds of US adults nationwide, 62%, said they feel Trump’s isn’t doing enough to address inflation. The Michigan survey showed that Americans are now fearful of higher inflation on the horizon.
On the campaign trail, Trump promised to “bring down prices, starting on Day One.” Clearly, that didn’t happen. In January, consumer prices climbed at the fastest monthly pace since August 2023, increasing 0.5% from December.
Joanne Hsu, the Michigan survey’s director, said in a release that the broad decline was “in large part due to fears that tariff-induced price increases are imminent.”
But changes in sentiment are beginning to diverge based on political affiliation.
“While sentiment fell for both Democrats and Independents, it was unchanged for Republicans, reflecting continued disagreements on the consequences of new economic policies,” she said.
Inflation killed Biden's presidency and it can easily kill Trump's presidency if he doesn't heed the warning.
Anyway, as Brian Evans and Lisa Kailai Han of CNBC report, the Dow drops 700 points for worst day of 2025 so far on new fears about economic growth:
Stocks sold off on Friday as new U.S. data sparked concern among investors over a slowing economy and sticky inflation, leading them in search of safer assets.
Losses intensified into the close as traders feared staying long into a weekend that could bring another barrage of headlines from the Trump administration, which has proposed a flurry of tariffs and other market-moving policy changes since taking charge a month ago.
The Dow Jones Industrial Average lost 748.63 points, or 1.69%, to close at 43,428.02. Friday’s decline, its worst in the young year, brought its two-day losses to roughly 1,200 points. The S&P 500 slid 1.71% to end at 6,013.13, marking a second negative session after the index closed at a record on Wednesday. The Nasdaq Composite dropped 2.2%, settling at 19,524.01.
A volley of data raised new concerns about the economy and sent investors into bonds, which caused yields to tumble. The University of Michigan consumer sentiment index fell to 64.7 in February, a decline of nearly 10% and a steeper drop than expected as consumers raised concerns about higher inflation ahead from possible new tariffs. The five-year inflation outlook in the survey was 3.5%, the highest since 1995. On top of that, existing home sales in the U.S. fell more than expected last month to 4.08 million units. The U.S. services purchasing managers’ index also dropped into contraction territory for February, according to S&P Global.
Walmart shares fell 2.5%, marking a second day of declines after the company issued a weaker-than-expected forecast that also soured the outlook for the consumer and the economy.
Prominent investor Steve Cohen shared some negative comments on the market and economy from a conference in Miami.
“It’s definitely a period where I think the best gains have been had and [it] wouldn’t surprise me to see a significant correction,” Cohen said, citing proposed tariffs dragging on the economy, as well as some of the government’s cost-cutting efforts.
Investor favorites such as Nvidia and Palantir saw steep losses on Friday as traders shifted toward traditionally safer assets. Procter & Gamble climbed 1.8%, while General Mills and Kraft Heinz advanced more than 3% each.
For the week, the S&P 500 slid about 1.7%, while the Dow and Nasdaq both lost 2.5%.
“The top 20 performers in the S&P 500 today are all from defensive sectors: consumer staples, utilities and healthcare,” said Larry Tentarelli, chief technical strategist and founder of the Blue Chip Daily Trend Report. “Investors often rotate into these so-called defensive sectors when economic growth concerns appear.”
And if that isn't depressing enough, a Chinese team has found a new bat coronavirus that carries the risk of animal-to-human transmission because it uses the same human receptor as the virus that causes Covid-19:
The study was led by Shi Zhengli – a leading virologist known as the “batwoman” due to her extensive research on bat coronaviruses – at the Guangzhou Laboratory along with researchers from the Guangzhou Academy of Sciences, Wuhan University and the Wuhan Institute of Virology.Shi is best known for her work at the Wuhan institute, which has been at the centre of the controversy about the origins of Covid, with one theory suggesting it came from a lab leak in the city.
Buckle up, things are about to get really interesting in Q2 and Q3.
Alright, let me wrap it up with the best and worst performing US large cap stocks this week (all data publicly available on Barchart.com):
Below, Tom Lee, Fundstrat CIO, joins 'Closing Bell Overtime' to talk the day's market action and his sell-off playbook.
Also, Ed Yardeni, Yardeni Research, joins 'Closing Bell' to discuss the market sell-off, consumer spending and what he sees in the market fundamentals.
Third, Mike Wilson, Morgan Stanley CIO, joins 'Power Lunch' to discuss investing in the European markets, the tech trade and the broadening out of the market.
Lastly, US Treasury Secretary Scott Bessent, in a wide-ranging interview on "Bloomberg Surveillance," discusses the Federal Reserve, debt market, US Treasuries, gold reserves, tariffs, dollar policy, foreign currencies, the relationship with Volodymyr Zelenskiy following the Munich Security Conference, Russian sanctions, AI end Elon Musk.
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