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.Vic Matiē Ankle Boot - Women Vic Matiē Ankle Boots online on YOOX United Kingdom - 11553908JJ , Tipe E Tacchi Court - Women Tipe E Tacchi Courts online on YOOX United Kingdom - 11408585CIJ|D Julie Dee Boots - Women J|D Julie Dee Boots online on YOOX United Kingdom - 11500464FNSmash V2 L Perf Women's Sneakers | Puma White-Puma White-Wins | PUMA Women's Faves | PUMA United States , Ovye' By Cristina Lucchi Open-Toe Mules - Women Ovye' By Cristina Lucchi Open-Toe Mules online on YOOX United Kingdom - 11563398PM , Adidas Originals Superstar 80S - Sneakers - Men Adidas Originals Sneakers online on YOOX United Kingdom - 11432762PSGiuseppe Zanotti Black 'coby' Velvet Double Gold Strap Hi-top Sneakers Multiple Sneakers , Vans Grey and White The New Pig Suede Court Dx - Sneakers , Nunn Bush Stu Slip-Resistant Plain Toe Oxford , Adidas Pons Quintana Slip-ons - black , Adidas Chie Mihara ART - Classic heels - ante/tina , men's/women's Adidas Tubular Shadow PK W Schuhe Selected materials , Bullboxer Classic ankle boots - dark brownFaith DIVA - High heeled sandals Colour: white , man/woman Camper TWS - K200587 Sneakers & Athletic Camper flagship store , adidas Performance POWERLIFT.3.1 - Sports shoes Colour: energy blue/energy aqua/noble ink , J.Born Boots - Women J.Born Boots online on YOOX United Kingdom - 11527319IO , Apepazza Sandals - Women Apepazza Sandals online on YOOX United Kingdom - 11443390NAGrenson Sneakers - Women Grenson Sneakers online on YOOX United Kingdom - 11553881DP , Fabi Sandals - Women Fabi Sandals online on YOOX United Kingdom - 11416126NHStele Court - Women Stele Courts online on YOOX United Kingdom - 11375339VJ , Fiorifrancesi Ankle Boot - Women Fiorifrancesi Ankle Boots online on YOOX United Kingdom - 11508574IOVeronique Branquinho Boots - Women Veronique Branquinho Boots online on YOOX United Kingdom - 11489238BBGiuseppe Zanotti Loafers - Women Giuseppe Zanotti Loafers online on YOOX United Kingdom - 11553552WE , Bottega Veneta Loafers - Women Bottega Veneta Loafers online on YOOX United Kingdom - 11289854FAWear resistant Jessica Simpson AishaExcellent quality Soludos Venetian MuleExquisite processing PUMA Safety ElevateWOMENS J.Crew Leopard Print Martina Wedges Fast deliveryCalvin Klein Blush Lucie Patent Mules 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.