“‘So far there’s no evidence of recession, and so long as there’s no evidence of recession, I believe the market will continue to melt up.””
That’s Steve Eisman, whose bets against collateralized-debt obligations tied to the U.S. housing market catapulted him to international fame following the 2008 financial crisis, on what he expects from U.S. stocks for the remainder of 2023.
Eisman’s exploits were chronicled in the Michael Lewis book “The Big Short,” which was turned into a hit 2015 film where actor Steve Carell played a fictionalized version of the investor, who at the time ran a hedge fund called FrontPoint Partners associated with Morgan Stanley.
On Monday, Eisman, now a portfolio manager at investing giant Neuberger Berman, joined CNBC’s “Squawk Box” to share some thoughts about the state of U.S. financial markets and the economy.
That the recession that practically everybody on Wall Street expected never materialized is one of the biggest factors driving the market higher this year, Eisman said.
So long as a recession doesn’t bear down on the U.S. economy, Eisman thinks investors will continue to chase the U.S. stock-market rally higher.
“I think a lot of people were very conservatively positioned and they’re trailing so they’re trying to keep up,” Eisman said.
He added that his team would stay invested “as long as the economy rolls along.”
Changing gears a bit, Eisman discussed what he expects from the Federal Reserve later this year.
Eisman said there could be as many as three rate hikes later this year. Whether or not it will undermine the market-leading technology giants remains to be seen.
How is his view on the Fed affecting his positioning?
“Maybe there’s three.”
Do the number of Fed hikes even matter?
“I mean, it matters to the extent that the higher rates go, the more of a negative impact it tends to have on growth stocks, so yeah it does matter.”
“The only caveat is that after the Fed raises rates, if the past is any guide, Powell will come out and be dovish,” he said.
The Fed has already raised rates “a lot,” Eisman said. He remains worried that these rate hikes could have a negative impact on the economy, “but there’s simply no data to support that at this time.”