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.Pretty Ballerinas Ankle Boot - Women Pretty Ballerinas Ankle Boots online on YOOX United Kingdom - 11514726XJ , Maison Margiela Ankle Boot - Women Maison Margiela Ankle Boots online on YOOX United Kingdom - 11470025GC , BAERCHI 5310 CASUAL SHOES FOR MAN , uXvm8ibu man/woman ALDO Thayllan Flats qualityLadies Salvatore Ferragamo Black Formal Shoes Elegant and stable packaging , woman Vince New Grey Sage Sandals Reliable reputationSENDRA BOOTS 11044 FASHION BOOTS FOR WOMEN , man/woman ALDO Fiachra Oxfords Exquisite (processing) processing , New Look SHEEP - SandalsAdidas ALDO SEIRIA - Ankle boots - black/white , Tod's Loafers - Women Tod's Loafers online on YOOX United Kingdom - 44748436DEHamaki-Ho Boots - Men Hamaki-Ho Boots online on YOOX United Kingdom - 11510083WI , Hogan Sneakers - Men Hogan Sneakers online on YOOX United Kingdom - 11475724WRAdidas Reebok Classic CLASSIC LEATHER WOVEN EMB - Trainers - black/white , Nike SB PORTMORE II SOLAR MID - Trainers - obsidian/phantom/blue force/white , Kenneth Cole New York BRAND - High-top trainers - black , men's/women's The North Face ThermoBall? Utility Boots Modern and elegantDiadora Heritage Sneakers - Men Diadora Heritage Sneakers online on YOOX United Kingdom - 11262460OH , adidas Performance PREDATOR 18.2 FG - Moulded stud football boots - core black/footwear white , Ras Loafers - Women Ras Loafers online on YOOX United Kingdom - 11495029AHElisa Mey® Sandals - Women Elisa Mey® Sandals online on YOOX United Kingdom - 11562366NG , Cesare Augusto Loafers - Men Cesare Augusto Loafers online on YOOX United Kingdom - 11487616VXUFz5Jfea L'Artiste by Spring Step Charliza , r6JWqhXh Justin Warhawk Waterproof Soft ToeGerman Outlets Tecnica Moon Boot® NylonTide shoes list CC Corso Como CelebraytVarious types and styles Levi's Shoes JacobyPropet Marv Make room for comfort with the modern Marv from PropetG.H. Bass & Co. Light Blue Men Footwear Sneakers , LADY Barneys Co-Op Black High Sandals packaging diversity
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.