Billionaire Leon Cooperman advised investors on Wednesday to stay away from bonds as they are in a bubble.
“My world is cash and stocks. I think bonds are the bubble, not stocks,” Cooperman told CNBC’s “Halftime Report.” He also noted investors should buy stocks they see as “fundamentally cheap” after a recent decline in equities.
Cooperman’s comments come after the benchmark 10-year note yield rose to 3.261 percent last week, its highest level since 2011. The sharp rise in rates spooked investors across the globe, with world equities falling sharply last week.
The Federal Reserve dropped its overnight interest rates to zero in the aftermath of the financial crisis as it tried to jumpstart the U.S. economy. This pushed yields down to historical lows, thus sending bond prices higher and to levels that some investors like Cooperman say reached bubble proportions. Now the Fed is reversing these policies by rising interest rates and trimming its balance sheet. The central bank has already hiked rates three times this year and is forecast to raise them once more before year-end.
Investors were worried that a rise in rates would lead to higher borrowing costs and thus slow down the global economy.
Cooperman, the CEO of Omega Advisors, said the market can handle higher interest rates, however, as there are no signs of a recession looming.
“The economy, if anything, is too strong,” Cooperman said. “The economy is on fire … The conditions that normally lead to a big decline just aren’t present.”
Cooperman’s comments come as U.S. stocks try to recover from a 4.1 percent decline last week amid worries about higher rates, tech valuations and fears of a global economic slowdown.What For Court - Women What For Courts online on YOOX United Kingdom - 11497937SJ , Gaimo Open-Toe Mules - Women Gaimo Open-Toe Mules online on YOOX United Kingdom - 11383985QRThe North Face M B2b Redux Trans Waterproof Shoes - Sneakers - Men The North Face Sneakers online on YOOX United Kingdom - 11334913VL , Plein Sport Runner Edward - Sneakers - Men Plein Sport Sneakers online on YOOX United Kingdom - 11307685QD , CALIFERS Ja659m17-plata Mujer Piel Ja659m17-plata PLATFORM SANDALS FOR WOMEN , Johnston & Murphy Tabor Dress Plain Toe Oxford , women J. Reneé Pewter Formal Shoes special purchase , BOBS from SKECHERS Bobs Cloudy - Dream Machine , BOSS Hugo Boss Enlight Tennis By Boss Green , men's/women's Adidas UltraBOOST Uncaged w Schuhe bargainASOS DESIGN | ASOS DESIGN Fame premium studded leather sandalsMen/Women Frye Demi Rebel Zip Bootie Boots have fun , Adidas Bronx Classic ankle boots - blackNike Sneakers - Men Nike Sneakers online on YOOX United Kingdom - 11485517BG , Crocs Slippers - Men Crocs Slippers online on YOOX United Kingdom - 11096351MG , J.LINDEBERG DOUBLE MONK WITH TOE CAP - Smart slip-ons Colour: brown , Guess Court - Women Guess Courts online on YOOX United Kingdom - 11326096WM , Clocharme Ankle Boot - Women Clocharme Ankle Boots online on YOOX United Kingdom - 11517139JX , Carla G. Boots - Women Carla G. Boots online on YOOX United Kingdom - 11522990QHwomen Jimmy Choo Pablo Wedges Germany , UCmxzZPa Lacoste L.30 Slide 218 2 , fN3OVzv5 BUGATTI 50007pl SHOES FOR WOMEN , sZHYye62 LOLAS S032355555mpi HIGH-TOP TRAINERSFOR WOMENdKchMaCm WOMEN Colin Stuart Wedges auction , Preferential price FitFlop Andor Smooth Leather , Promotion Reebok Speed TR FlexweaveQueensland Frye John Addison Harness , Nike College Navy Men’s Epic React Flyknit Running Sneakers , woman Puma Pink Suede Sneakers Elegant and robust menu , WOMENS J. Reneé Formal Shoes Elegant and solemn
But Cooperman thinks stocks will bounce back from this decline as they are fairly valued. He also noted the market can handle higher interest rates.
“My central view is the market will be higher than it is today at year-end,” he said. “We’re in a zone of fair value and it’s going to take a recession or a change in the Fed’s posture” to get us out of that.