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.L' Autre Chose Sandals - Women L' Autre Chose Sandals online on YOOX United Kingdom - 11134520DO , Lola Cruz Ankle Boot - Women Lola Cruz Ankle Boots online on YOOX United Kingdom - 11547737BMJ|D Julie Dee Ankle Boot - Women J|D Julie Dee Ankle Boots online on YOOX United Kingdom - 11487730KP , men/women adidas Messi 16.2 FG Sneakers & Athletic adidas Highly praised and appreciated by the consumer audience , mens/womens Ivanka Trump Liah 4 Heels Export , men/women Patricia Nash Flair Sandals Selected materials , Zapato autoclave trainers , grey, VictoriaSelected Femme High heels Colour: blackCaprice Classic ankle boots Colour: navyBugatti ALTEA - Mules Colour: blue , Men/Women GBX Bran Sneakers & Athletic GBX Lightweight shoes , Adidas Sixtyseven LEONEL - Trainers - all black , Walker orient wedge sandals , black, Pepe JeansAdidas Vagabond TIA - Mules - black , Marni Sandals - Women Marni Sandals online on YOOX United Kingdom - 11478656AI , Hogan Sneakers - Women Hogan Sneakers online on YOOX United Kingdom - 11557605GRBikkembergs Sneakers - Men Bikkembergs Sneakers online on YOOX United Kingdom - 11565107HWBikkembergs Sneakers - Men Bikkembergs Sneakers online on YOOX United Kingdom - 11220325QJSturlini Loafers - Men Sturlini Loafers online on YOOX United Kingdom - 11545967SM , Dr. Martens GRAYSON - Classic ankle boots - tan luxor , Joseph Boots - Women Joseph Boots online on YOOX United Kingdom - 11481078VLMagrit Sandals - Women Magrit Sandals online on YOOX United Kingdom - 11571222DBMiu Miu Court - Women Miu Miu Courts online on YOOX United Kingdom - 11471537DX , Bruno Premi Boots - Women Bruno Premi Boots online on YOOX United Kingdom - 11571580TA , Prada Black Men's Gabardine Thunderbolt SneakersPuma Beige Gold Star White Sneakers , Pleasant appearance SOLE / SOCIETY Calypso , sell New Balance WW1350W1 WalkingLightweight shoes Spring Step Aellice , Many styles Vans Authentic Lite
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.