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.Patrizia Pepe Ankle Boot - Women Patrizia Pepe Ankle Boots online on YOOX United Kingdom - 11517693RFGiorgia B. Court - Women Giorgia B. Courts online on YOOX United Kingdom - 11502327UE , Arfango Ankle Boot - Women Arfango Ankle Boots online on YOOX United Kingdom - 11475337GW , WOMEN Rockport Taupe Prowalker Leather Sneakers Known for its beautiful quality , MODABELLA Sandalia Modabella De Piel Blanca FASHION SANDALS FOR WOMEN , adidas X Yeezy Oxford Tan Boost 350 Sneakers , LADY Stuart Weitzman White Formal Shoes Order welcomewoman Alexander Wang Orange Antonia Sandals product qualityKenneth Cole New York Mix Oxford BZALIAN 69861 Marino FASHION BALLERINAS FOR WOMEN , TOSCA BLU Tf780580 LOW-TOP TRAINERS FOR WOMENSKECHERS Performance Go Walk 4 - AdvanceTouch ‘n’ close trainers , white, La Redoute Collections , Steve Madden | Steve Madden Bringit Strappy Heeled Sandals , men's/women's Calvin Klein Mulan CK Logo Sandals Beautiful , Spaziomoda Loafers - Women Spaziomoda Loafers online on YOOX United Kingdom - 11448199OV , Moma Boots - Men Moma Boots online on YOOX United Kingdom - 11550651NX , Be Mine | Be Mine Bridal Mae Ivory Satin Embellished Ankle Strap Sandals , Adidas Marcel Ostertag x Tamaris High heeled sandals - nude , Crime London Sneakers - Men Crime London Sneakers online on YOOX United Kingdom - 11520947LA , Daniele Alessandrini Loafers - Men Daniele Alessandrini Loafers online on YOOX United Kingdom - 11400968WGCafènoir Sneakers - Women Cafènoir Sneakers online on YOOX United Kingdom - 11508499GB , Cult Open-Toe Mules - Women Cult Open-Toe Mules online on YOOX United Kingdom - 11473185FN , Vicini Tapeet Sandals - Women Vicini Tapeet Sandals online on YOOX United Kingdom - 11420955UF , wpoYvzip Camper Oruga Sandal - K100287 , various kinds Roper American Beauty FringeNew varieties are launched DAKOTA BOOTS 91MISS Jambu Black Suede Wedges King of the quantityTory Burch White Patent Leather Runway Slingback Sandals , Prada Green/ White Womens and Womens Euro Sandals
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.