Billionaire Marc Lasry: Market Not Pricing In Prolonged Recession

(Business Insider) 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."

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."

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. 


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