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Veteran investor Leon Cooperman believes the current bull market may be entering its final stages, a phase where risks rise, bubbles can form, and investor behavior becomes increasingly irrational—a warning that Warren Buffett highlighted decades ago.

Cooperman, chair and CEO of the Omega Family Office, referenced Buffett’s 1999 insight on CNBC’s Money Movers, noting its relevance today:

“Once a bull market gets under way, and once you reach the point where everybody has made money no matter what system he or she followed, a crowd is attracted into the game that is responding not to interest rates and profits but simply to the fact that it seems a mistake to be out of stocks.”

Buffett cautioned that bull markets often end not only when valuations become stretched, but also when rallies are driven more by momentum and herd behavior than by fundamentals. Cooperman sees those patterns mirrored in today’s market, particularly in the tech sector.

Tech Stocks and AI Drive the Rally

The S&P 500 has climbed nearly 40% from its April lows, reaching all-time highs fueled by mega-cap technology companies investing heavily in artificial intelligence. Valuations for AI-focused firms have soared to levels Cooperman describes as “ridiculously high,” reflecting investor optimism rather than earnings growth.

The Buffett Indicator, which measures total U.S. stock market value relative to GDP, is sending clear warning signals. Currently at 217%, it surpasses the peaks of both the Dotcom Bubble and the pandemic-era rally in 2021, a level Buffett once warned was “playing with fire.” This suggests that equity prices are far ahead of the underlying economic reality, raising the likelihood of a market correction.

Stocks vs. Bonds in the Current Cycle

While Cooperman views late-cycle stock exuberance as a potential risk, he considers government bonds even less attractive. With inflation elevated, fixed-income securities pay nominal interest that is increasingly eroded in real terms.

“Stocks are less risky than bonds at these levels,” he said, emphasizing that despite high valuations, equities may still offer a better hedge against inflation than bonds in today’s market environment.

Key Takeaways for Investors

• The bull market may be in its late stages, characterized by momentum-driven rallies rather than fundamentals.
• AI and tech stocks are driving valuations to historic highs, attracting late-cycle investors.
• The Buffett Indicator at 217% signals caution, exceeding previous bubble-era peaks.
• Government bonds may underperform due to inflation, making equities relatively more appealing.
• Investors should be mindful of market sentiment, valuations, and herd behavior as indicators of potential risk.

In summary, while stocks continue to climb, Cooperman’s analysis aligns with Buffett’s timeless advice: late-stage bull markets require vigilance, disciplined investing, and awareness of the fine line between opportunity and overexuberance.