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Billionaire investor Marc Lasry says the market isn’t pricing in a recession that will last ‘for a while’


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Billionaire investor Marc Lasry says the market isn’t pricing in a recession that will last ‘for a while’

Lucas Jackson/Reuters The US will be stuck in a recession “for a while,” and the stock market isn’t currently priced for that outcome, Avenue Capital CEO Marc Lasry said Thursday. “It’s going to be a hard couple years” as unemployment fails to recover and an economic rebound sputters, he added in a CNBC interview. The…

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Billionaire investor Marc Lasry says the market isn’t pricing in a recession that will last ‘for a while’

Marc LasryLucas Jackson/Reuters

  • The US will be stuck in a recession “for a while,” and the stock market isn’t currently priced for that outcome, Avenue Capital CEO Marc Lasry said Thursday.
  • “It’s going to be a hard couple years” as unemployment fails to recover and an economic rebound sputters, he added in a CNBC interview.
  • The billionaire still sees markets returning to past highs down the road, saying the market is “correct” to project “great” earnings in 2022.
  • Visit the Business Insider homepage for more stories.

The stock market is in for a rude awakening once investors fully realize how long the coronavirus recession will last, Avenue Capital CEO Marc Lasry said Thursday.

While the equity rally from recent lows has slowed, prices are historically high relative to expected profits. Several market experts fear the fragile rally can easily collapse under a second wave of coronavirus cases or a delayed surge in bankruptcies. Lasry is the latest to join the fray, cautioning that the US will be in a recession “for a while” as the pandemic’s fallout lingers.

“I think sooner or later the market will realize that,” the billionaire investor said on CNBC. “I think it’s going to be a hard couple years.”

Read more: ‘It works for anything I look at’: BlackRock’s bond chief who oversees $2.3 trillion shares the ‘really simple’ 3-part framework that guides every investment decision he makes – and outlines 2 factors he looks for in a company

Much of the country’s recovery hinges on an uptick in spending, and Lasry fears soaring unemployment and diminished consumer confidence will delay such a rebound. Jobless claims data released Thursday revealed another 2.4 million Americans filed for unemployment benefits last week, bolstering fears that the second quarter will post the current downturn’s bleakest readings yet.

While roughly 18 million Americans currently classify their joblessness as temporary, Lasry thinks that proportion will shrink as companies fail to take workers back. The trend will cut into consumer spending and further delay an upswing, he said.

“If you’re going to have all these people unemployed, it’s hard to end up coming out of a recession until that changes. It’s going to be a difficult couple years,” Lasry said, adding “I just don’t see people that are out of work spending money.”

Read more: Multiple readings of the stock market’s future are near their worst levels ever. UBS says that’s set up a ‘significant recovery’ – and lays out a 2-part playbook to profit from it.

Despite his gloomy outlook, the hedge fund manager still sees an end in sight. Several companies have pulled earnings guidance due to the coronavirus threat and uncertainties sourced from the pandemic, but those still issuing forecasts suggest profits will take years to normalize.

Certain companies will emerge as winners during the nationwide lockdown, but the broad market will rely on containing the virus and slowly bringing industries back online, Lasry said.

“At the end of the day, the market is saying earnings are going to be great in 2022. I don’t disagree with that. I think that’s actually correct,” he added. 

Now read more markets coverage from Markets Insider and Business Insider:

Treasury Secretary Mnuchin sees ‘strong likelihood’ that further stimulus is needed as Senate spars over new bill

Bank of America lays out a bullish scenario where US stocks surge 14% over the next year

These 11 stocks loved by hedge funds have beaten the market during both the coronavirus collapse and its subsequent recovery, RBC says

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