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.Giuseppe Zanotti Ankle Boot - Women Giuseppe Zanotti Ankle Boots online on YOOX United Kingdom - 11500008UG , Brown Black Ankle Boot - Women Brown Black Ankle Boots online on YOOX United Kingdom - 11525833LF , Patrizia Pepe Ankle Boot - Women Patrizia Pepe Ankle Boots online on YOOX United Kingdom - 11436513QC , Bianca Di Ankle Boot - Women Bianca Di Ankle Boots online on YOOX United Kingdom - 11572126WSChristian Louboutin Red Louis Flat Sneakers , Roberto Della Croce Ankle Boot - Women Roberto Della Croce Ankle Boots online on YOOX United Kingdom - 11526481QQ , Bates Footwear Raide Hot Weather Side Zip TacticalNew Balance White with Blue Trim 1540wb2 Sneakers , men's/women's Nine West Winjum Loafers Year-end saleSilver flat leather sandals , silver-coloured, Geox , Bow trainers , pale pink, PumaColumbia CAMDEN - Walking bootsmen's/women's Reef Spiniker Mid SE Boots Various latest designsKnotted canvas sandals , navy blue, La Redoute Collections , ASOS DESIGN | ASOS DESIGN Hartly Wide Fit Embellished Heeled Sandalsadidas Performance ASPIRE - Multicourt shoes Colour: footwear white/grey two/clear mint , Mou Sandals - Women Mou Sandals online on YOOX United Kingdom - 11562410DX , Icône Court - Women Icône Courts online on YOOX United Kingdom - 11432151XH , Luca Valentini Court - Women Luca Valentini Courts online on YOOX United Kingdom - 11508144MLKeys Ankle Boot - Women Keys Ankle Boots online on YOOX United Kingdom - 11086995HP , Emanuela Passeri Loafers - Women Emanuela Passeri Loafers online on YOOX United Kingdom - 11331822GNHavaianas Flip Flops - Women Havaianas Flip Flops online on YOOX United Kingdom - 11496862COCharlotte Olympia Loafers - Women Charlotte Olympia Loafers online on YOOX United Kingdom - 11537333MDWOMENS DKNY Black/White/Silver Velene Wedges diversityArche Sand Obie Brown Nubuck Women's Low Heel Comfort SandalsTory Burch Bleach/Gold New In Box Thora Tumbled Leather SandalsLadies Christian Louboutin White/Silver/Clear Dufora Platforms High quality and economyWOMENS Valentino Blue-gray Rockstuds Heels Pumps Different styles and stylesNike Women's Roche One Cherry Blossom Running Sneakers , LADY Dior Black J’adior Slingback Pumps retail price
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.