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.Le Silla Ballet Flats - Women Le Silla Ballet Flats online on YOOX United Kingdom - 11524058GU , Dolce & Gabbana Sneakers - Men Dolce & Gabbana Sneakers online on YOOX United Kingdom - 11567743QJ , Cinzia Soft By Mauri Moda Loafers - Women Cinzia Soft By Mauri Moda Loafers online on YOOX United Kingdom - 11507321RETosca Blu Shoes Ankle Boot - Women Tosca Blu Shoes Ankle Boots online on YOOX United Kingdom - 11538138AAKatie Grand Loves Hogan Loafers - Women Katie Grand Loves Hogan Loafers online on YOOX United Kingdom - 44946732UOMarc by Marc Jacobs New Glitter Slip On Sneakers Sneakers , SPM NANO - High heeled boots , FitFlop Tia Fringe Toe Thong Sandal , PUMA Puma X DP Match SplatterASOS DESIGN | ASOS DESIGN Mews Studded Flat Shoes , Steve Madden RECKON - High-top trainers - black , men/women To Boot New York March Boots luxurious , Oamc Sneakers - Men Oamc Sneakers online on YOOX United Kingdom - 11457767KREleventy Boots - Men Eleventy Boots online on YOOX United Kingdom - 11557916MM , 3:10 Sneakers - Men 3:10 Sneakers online on YOOX United Kingdom - 11557413QLTod's Loafers - Men Tod's Loafers online on YOOX United Kingdom - 11549199GQman/woman New Balance Minimus WT10v4 Sneakers & Athletic New Balance Various goodsAdidas Skechers Performance GO FLEX MAX - Trainers - black/white , U.S.Polo Assn. Sneakers - Men U.S.Polo Assn. Sneakers online on YOOX United Kingdom - 11515891HHSebastian Court - Women Sebastian Courts online on YOOX United Kingdom - 11445757CO , Garrice Sandals - Women Garrice Sandals online on YOOX United Kingdom - 11560449RMLa Sellerie Sandals - Women La Sellerie Sandals online on YOOX United Kingdom - 11456298LUCamilla Elphick Sneakers - Women Camilla Elphick Sneakers online on YOOX United Kingdom - 11500115JA , Fiorentini+Baker Ankle Boot - Women Fiorentini+Baker Ankle Boots online on YOOX United Kingdom - 11537284HJ , Guess Ankle Boot - Women Guess Ankle Boots online on YOOX United Kingdom - 11471931ND , Hogan Ankle Boot - Women Hogan Ankle Boots online on YOOX United Kingdom - 11230286XHLeather Crown Sneakers - Men Leather Crown Sneakers online on YOOX United Kingdom - 11326600SEmqPaVXDY CHAMBY 4900 MULES PARA MUJER , Ladies Steve Madden Black Jeweled Sandals High quality and economy , WOMEN Prada Tan/Brown Sandal Platforms Qualified production
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.