Steve Cohen Warns of 10-15% Market Decline Amid 45% Recession Risk

Steve Cohen, the founder of Point72 Asset Management, recently shared his views on the U.S. stock market's rapid rebound in April. Speaking at an investment conference in New York, Cohen, often compared to the legendary basketball player Michael Jordan in the hedge fund world, noted the unusual speed of the market's decline and subsequent recovery. He advised investors to brace for potential market volatility, stating that a 10-15% decline would not be disastrous.

Cohen's comments come as the probability of a U.S. economic recession has risen to around 45%. He warned that while the economy has not yet entered a recession, growth is notably slowing. He predicted that U.S. economic growth could decelerate to 1.5% or lower next year, a rate he described as "acceptable but not outstanding," and significantly lower than recent average growth rates.

Cohen also discussed the potential impact of tariff policies on inflation, suggesting that the Federal Reserve may not immediately lower interest rates. This perspective contrasts with market expectations that the Fed might act swiftly to reduce rates. Cohen's analysis highlights the intricate relationship between economic indicators, market sentiment, and policy decisions, urging investors to stay alert and adaptable amidst potential market fluctuations.

Cohen's remarks reflect a broader sentiment among market participants who are closely watching economic data and policy developments. He noted that the market's response to upcoming economic data releases will be crucial in determining whether current valuations are justified. Cohen also proposed that the market could experience a period of range-bound trading, where prices fluctuate within a specific range rather than showing a clear upward or downward trend. He argued that this scenario is entirely normal and should not be seen as a sign of market distress.

In summary, Cohen's insights offer a nuanced view of the current market landscape, emphasizing the need for investors to stay informed and prepared for potential changes. His predictions about economic growth and market behavior provide valuable perspectives for those navigating the complexities of the financial markets.