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.Giancarlo Paoli Ankle Boot - Women Giancarlo Paoli Ankle Boots online on YOOX United Kingdom - 11479362JLLEVIS 226788-1955 BOTíN PLANO DE MUJER , Women's rebels Rb-yale Sandals Lush designFerrari Drift Cat 5 Ultra Sneakers | Puma White-Rosso Corsa-Black | PUMA Ferrari | PUMA United States , Nila & Nila Ankle Boot - Women Nila & Nila Ankle Boots online on YOOX United Kingdom - 11474215FP , KICKERS 350015-50 Spartame 113 Beige SANDALIA PLANA DE MUJERReebok Raspberry and Black Crossfit Nano Sneakers , WOMENS Prada Nude Unsure Wedges quality products , Men/Women Miz Mooz Tris Sandals Moderate pricemens/womens ALDO Mudia Loafers the most convenientecco BABETT - Ankle boots Colour: blackadidas Originals FALCON - Trainers , Men/Women Hush Puppies Margot Langdon Heels high quality productD marykarmen p.b leather wedge sandals , white, Geox , Adidas New Balance WL373 - Trainers - pink , Dorothy Perkins ALINA - Ankle boots Colour: black , Lumberjack Sneakers - Men Lumberjack Sneakers online on YOOX United Kingdom - 11516721KU , Nike Performance AIR ZOOM PEGASUS 34 - Neutral running shoes , adidas Performance X TANGO 18.1 TR - Sports shoes - solar yellow/core black , Lefabian Sandals - Women Lefabian Sandals online on YOOX United Kingdom - 11557933QQ , Fitflop Loafers - Women Fitflop Loafers online on YOOX United Kingdom - 11474542NNGiampaolo Viozzi Sandals - Women Giampaolo Viozzi Sandals online on YOOX United Kingdom - 11465433AF , Le Silla Boots - Women Le Silla Boots online on YOOX United Kingdom - 11287608BH , Cuplé Ankle Boot - Women Cuplé Ankle Boots online on YOOX United Kingdom - 11542623LT , Jeffrey Campbell Sandals - Women Jeffrey Campbell Sandals online on YOOX United Kingdom - 11466265EDGianni Marra Court - Women Gianni Marra Courts online on YOOX United Kingdom - 11438256PL , Versace Jeans Court - Women Versace Jeans Courts online on YOOX United Kingdom - 11306812FSJsKfdSL2 Florsheim Postino Double Monk StrapCustomer first Dolce Vita Straw , Converse Multi Color Geometric Design Chuck Taylor All Star 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.