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.Nicole Bonnet Paris Sandals - Women Nicole Bonnet Paris Sandals online on YOOX United Kingdom - 11460644XONike Af1 Upstep Si - Sneakers - Women Nike Sneakers online on YOOX United Kingdom - 11482037ALMiu Miu Orange Blue Orange/Navy Sandals , Muse CUT-OUT Women’s Sneakers | Plat Blue-Plat Blue | PUMA Xtreme Pack | PUMA United StatesVans UA SK8-Hi 46 MTE DX (mte) / black / Flannel , Nike Free Run Motion Fk 2017 - Sneakers - Women Nike Sneakers online on YOOX United Kingdom - 11262510AN , Dibrera By Paolo Zanoli Boots - Women Dibrera By Paolo Zanoli Boots online on YOOX United Kingdom - 11446747LPSenso Jensen Iv - Ankle Boot - Women Senso Ankle Boots online on YOOX United Kingdom - 11556444NKOTAZUA Olly. Tallas Especiales ZAPATO DE SALóN PARA MUJERSENDRA BOOTS 14627 FASHION ANKLE BOOTS FOR WOMEN , Women's Tory Burch Navy Bow Wedges Low costsmens/womens Katy Perry The Manna Sandals durablemen's/women's Adidas Terrex Pathmaker Cw Shoes Schuhe Personalization trend , mens/womens Cole Haan Ella Grand Espadrille Flats Moderate priceFranceschetti Sneakers - Men Franceschetti Sneakers online on YOOX United Kingdom - 11533553AM , Frau Loafers - Men Frau Loafers online on YOOX United Kingdom - 11459352QOBikkembergs Sneakers - Men Bikkembergs Sneakers online on YOOX United Kingdom - 11450756AS , adidas Performance PREDATOR 18.2 FG - Moulded stud football boots - syello/cblack/solredmen's/women's Nike Air Max Kantara Sneakers & Athletic Nike main categoryman/woman Nike Flex Control II Sneakers & Athletic Nike Aesthetic appearance , New Balance Sneakers - Men New Balance Sneakers online on YOOX United Kingdom - 11372655HF , Mimmu Ankle Boot - Women Mimmu Ankle Boots online on YOOX United Kingdom - 11518397SI , HPJTwJdY Paul Smith Grand Stripe Oxford , Great variety Clarks Un Adorn Step , Fine workmanship Merrell Outmost Vent Waterproof , various kinds Sanuk Vagabond Tripper , Valentino Black Rockstud Blue Bead Triple Strap Kitten Heel 38 Pumps , WOMEN Jimmy Choo Gold Token Wedges New products in 2382LADY Burberry Nude Leather Suede Wedges Special function , Matisse Taupe Suede Toe Loop Slingback 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.