(Adds additional Tepper comments)
NEW YORK, Sept 10 (Reuters) - David Tepper, head of hedge fund Appaloosa Management, said Thursday that there would be more volatility in the stock market as it adjusts to new realities, and that he was not overly bullish on stocks next year.
“The market has to come to certain new realities, and adjust valuations to those new realities, and while they’re adjusting to those new realities...there will be volatility,” Tepper told CNBC.
Tepper, whose firm oversees $20 billion in assets, also said he was not “as bullish” as he could be on stocks next year and that people had high earnings expectations.
“I can’t really call myself a bull,” Tepper said. “I’m not probably as bullish as I could be because I have problems with earnings growth, I have problems with multiples.”
Tepper also cited lower global economic growth as a reason for his tempered expectations. He said investors who have all of their money in the stock market should make sure they have some cash, and that there were stocks that would likely correct lower.
“You’re now in a valuation range, I think, that you’re either right or you’re a little bit too expensive,” Tepper said. He added, however, that if the stock market declined 15 or 20 percent, he would buy shares.
Tepper also attributed recent market volatility to reserve drawdowns from China and other emerging markets.
He said that a steady flow of money, which was a product of China and other emerging markets building up reserves and the United States, Europe, and Japan initiating bond-buying stimulus policies, had been disrupted by drawdowns in those reserves.
“For 15, 17 years you had a river flowing one way, just flowing, you could just say a money flow, reserves got up to $10-11 trillion around the world,” Tepper said.
“Sometime this year, you had the reserves flowing the other way what happens when you have two bodies of water flowing different ways? What do you get? You get turbulence, you get waves,” Tepper said.
Global financial markets have been rattled in recent weeks by fears over China’s slowdown, with all three major U.S. stock indexes posting losses of at least 3 percent last week.
Tepper, whose Appaloosa held 2.5 million shares of Apple and 1.4 million shares of Alibaba as of June 30 according to Securities and Exchange Commission filings, said Apple was a “cheap stock” and that his firm sold the remainder of its Alibaba shares in early July. (Reporting by Sam Forgione; Editing by Chizu Nomiyama and Alan Crosby)