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.Alberto Fermani Ankle Boot - Women Alberto Fermani Ankle Boots online on YOOX United Kingdom - 11546319KF , Vic Matiē Ankle Boot - Women Vic Matiē Ankle Boots online on YOOX United Kingdom - 11015804BKSaucony Shadow Original - Sneakers - Men Saucony Sneakers online on YOOX United Kingdom - 11465000EV , Merrell Work Fullbench 2 SD STMm6 Maison Margiela Flip Flops - Women Mm6 Maison Margiela Flip Flops online on YOOX United Kingdom - 11353476FLNew Balance 520 Metallic - Sneakers - Women New Balance Sneakers online on YOOX United Kingdom - 11466928HB , Ladies Madden Girl Nude Ursey Wedges Popular tide shoesadidas Originals GAZELLE - Trainers Colour: core black , men/women FLY LONDON Yama Boots International choice , mens/womens Bed Stu Scoria Loafers Excellent craftA.S.98 Cowboy/Biker boots - nero , Puma IGNITE FLASH - Sports shoes Colour: dark green , Reebok FLOATRIDE RUN FLEXWEAVE - Neutral running shoes , Men/Women MJUS Cowboy/Biker boots Colour: calipso/ebano businessSkechers Sport OVERHAUL - Trainers - olive/black , Springa Sneakers - Men Springa Sneakers online on YOOX United Kingdom - 11574412RKSalomon SPEEDCROSS 4 GTX - Trail running shoes - fjord blueadidas Performance TERREX SWIFT SOLO - Climbing shoes - dunkelblau , Nike SB STEFAN JANOSKI MAX - Trainers - blue void/white , Converse by John Varvatos Chuck Taylor All Star II Hi TextilePhilippe Model Sneakers - Men Philippe Model Sneakers online on YOOX United Kingdom - 11488244PBAnn Demeulemeester Boots - Men Ann Demeulemeester Boots online on YOOX United Kingdom - 11572650SK , mens/womens SeaVees Racquet Club Sneaker Varsity Sneakers & Athletic SeaVees Win highly appreciated , Otö Ankle Boot - Women Otö Ankle Boots online on YOOX United Kingdom - 44660511QB , Alberto Guardiani Loafers - Women Alberto Guardiani Loafers online on YOOX United Kingdom - 11560873IW , What For Boots - Women What For Boots online on YOOX United Kingdom - 11540330HJ , Sergio Rossi Sneakers - Women Sergio Rossi Sneakers online on YOOX United Kingdom - 11564229HVAnnarita N. Sneakers - Women Annarita N. Sneakers online on YOOX United Kingdom - 11479645TAFashion pattern SAS JV Mesh , Balmain Black Doda Low Top Leather and Neoprene Sneakers Sneakers
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.