Billionaire Investor Leon Cooperman Just Revealed How He's Navigating the Ongoing Tariff-Driven Sell-Off

For the last week, financial news programming has covered one particular topic non-stop: U.S. President Donald Trump's new tariff policies.

It seems like every few minutes, a new economist, hedge fund manager, or business executive is being broadcast on television -- each providing a unique perspective on the effects these tariffs could have on the economy. Given the wide array of conflicting viewpoints, it's not surprising to see the capital markets witness sharp sell-offs and rebounds based on the latest breaking news headline.

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Amid all the chaos, some recent commentary from billionaire hedge fund manager and CEO of Omega Advisors Leon Cooperman stuck out to me. Let's take a look at his thoughts on the current market, and explore how his viewpoints can help investors navigate uncertainty during this heightened period of tension in the stock market.

How is Leon Cooperman preparing for market volatility?

During a recent panel discussion on CNBC, Cooperman was asked about his thoughts on the tariffs, the ongoing market sell-off, and even some of his fund's specific positions.

Cooperman admitted that he would not be shocked if stocks exhibit uninspiring returns for an "extended period." While that might suggest some opportunity to buy dips in depressed stock prices, Cooperman also made it clear that he's being careful right now. To be specific, he said he isn't buying the current weakness because he doesn't trust this level of extreme volatility.

Image source: Getty Images.

Why doesn't Cooperman trust the weakness in the market?

During the interview, Cooperman was asked what he thought would happen if the tariff policies were lifted or at least relaxed on some levels. He confidently replied by saying the markets would experience a short-term rally, but doubled down on his stance that investors may not have seen the bottom just yet.

Well, on April 9, President Trump did in fact institute a pause on his initial tariffs -- replacing them with a 10% tariff for 90 days for many of the countries the U.S. trades with.

^SPX data by YCharts.

The chart above illustrates the returns of the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average since April 2 -- the day President Trump announced his initial tariff agenda. Each of these indices dropped by at least 11%. However, just as Cooperman predicted, stocks began to rally quite dramatically following Trump's new tariff pause on April 9. While each index is still down since April 2, the rebound illustrated above was sharp, to say the least.

Cooperman's point about trust makes a lot of sense

Given that the markets tanked following the initial tariff announcement last week, it makes sense that shares would rally following some positive news, just as Cooperman suggested. However, in a way, neither of these actions necessarily makes sense on a fundamental level -- and perhaps this is why Cooperman says he isn't totally trusting the weakness in the market right now.

What I mean by this is that the initial sell-off and current rally are both based purely on tariff narratives. News alone is not an inherent reason to buy or sell a stock. Rather, the constant ebbing and flowing of stock prices right now appears to be driven by emotion -- how investors are feeling based on a specific piece of news.

The thing about tariffs is that they can change at the flick of a switch. For example, while President Trump relaxed his policies for most trade partners on April 9, he also doubled down on raising tariffs for China. This is important, because at any moment these policies could change once again -- and depending on the country or the specific goods targeted, it could have massive ripple effects on certain industries and end markets.

I think Cooperman is right to remain suspicious. Right now, I think the current price action we're seeing is intensely rooted more in emotion than logic, making it incredibly challenging to navigate which stocks could present good value at this point.

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Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.