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.Nike Free Run Distance Shield - Sneakers - Women Nike Sneakers online on YOOX United Kingdom - 11189459AI , Nike Free Run Motion Fk 2017 - Sneakers - Men Nike Sneakers online on YOOX United Kingdom - 11262477KP , Twin-Set Simona Barbieri Ankle Boot - Women Twin-Set Simona Barbieri Ankle Boots online on YOOX United Kingdom - 44943912VI , WOMEN Sand Classic Style In Sandals Make full use of materials , XTI 28720 C Taupe WEDGE ANKLE BOOTS FOR WOMENMARIA MARE 61199 Napal Negro FASHION FOOTWEAR FOR WOMENLOIS 61139 R1 06 Blanco SLIP-ON PARA MUJER , LADY Prada White/Red Heart Print Sandals Primary qualitymens/womens Missoni Derby Platform Oxfords value , Dorothy Perkins FOREST - MulesFred Perry | Fred Perry underpsin twill sneakers in blackSalewa CROW GTX - Climbing shoes - black/papaveromens/womens Eugene Riconneaus Calcuta Open Flats Modern design , mens/womens Geox WNewClub26 Sneakers & Athletic Geox fashion , Buffalo London BLOSSOM - High heels Colour: silver , Tod's Loafers - Women Tod's Loafers online on YOOX United Kingdom - 11568823RC , O.X.S. Boots - Men O.X.S. Boots online on YOOX United Kingdom - 11457696PL , A.Testoni Sneakers - Men A.Testoni Sneakers online on YOOX United Kingdom - 11555462QS , Belstaff Boots - Men Belstaff Boots online on YOOX United Kingdom - 11328747XGDoucal's Loafers - Men Doucal's Loafers online on YOOX United Kingdom - 11567352JXmens/womens Merrell Duskair Smooth Sneakers & Athletic Merrell High quality and economyRick Owens Sneakers - Men Rick Owens Sneakers online on YOOX United Kingdom - 11578795BPGuess Sandals - Women Guess Sandals online on YOOX United Kingdom - 11335023EJCrocs Sandals - Women Crocs Sandals online on YOOX United Kingdom - 11571571IT , Ruco Line Sneakers - Women Ruco Line Sneakers online on YOOX United Kingdom - 11471406BDPaul Andrew Court - Women Paul Andrew Courts online on YOOX United Kingdom - 11365749OH , Non-slip Foot Petals Cushionology CamiLifeStride Pearla Discover your elegant side with the sleek design of the Pearla pump by LifeStride! , ladies Charles Jourdan Canary Slingbacks Platforms Preferred material , WOMEN Brown Paradis Coleur Sandals Wedges Discount
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.