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.Bianca Di Ankle Boot - Women Bianca Di Ankle Boots online on YOOX United Kingdom - 11572120VRAlejandro Ingelmo Court - Women Alejandro Ingelmo Courts online on YOOX United Kingdom - 11472355IE , Marc Jacobs Sandals - Women Marc Jacobs Sandals online on YOOX United Kingdom - 44971963KOSKECHERS Performance GOwalk Lite - CoralN.D.C. Made By Hand Sandals - Women N.D.C. Made By Hand Sandals online on YOOX United Kingdom - 11521564EGNike Olive Green Womens Dunk Sky Hi Essential Style 644877 Sneakers , adidas Black and Charcoal Nmd R1 Knit SneakersDonald J. Pliner Pearl Callie Strappy Slide Sandals , women Tory Burch Lucas Flats Sandals Low priceMen/Women Vince Camuto Raner Heels professional design , Dinah keer leather heels , black, Clarksmens/womens Splendid Franci Sandals Sufficient supplyKenneth Cole New York Premire ShowColmar Originals TRAVIS DRILL - Trainers - military green , man/woman Fergalicious Wisdom Boots a wide variety of goodsmens/womens Mezlan Strauss Loafers Different styles and stylesSee by Chloé High heeled sandals Colour: tartan , Calpierre Sneakers - Men Calpierre Sneakers online on YOOX United Kingdom - 11551910PN , Adidas Les Tropéziennes par M Belarbi ORAZIO - T-bar sandals - rose , New Balance Sneakers - Men New Balance Sneakers online on YOOX United Kingdom - 11503267GD , P448 Sneakers - Women P448 Sneakers online on YOOX United Kingdom - 11558722GN , Philipp Plein Court - Women Philipp Plein Courts online on YOOX United Kingdom - 11543939HD , Antonio Barbato Court - Women Antonio Barbato Courts online on YOOX United Kingdom - 11508806QLAntica Cuoieria Loafers - Women Antica Cuoieria Loafers online on YOOX United Kingdom - 11527803LINew Balance Sneakers - Women New Balance Sneakers online on YOOX United Kingdom - 11293589EE , Pick up at the boutique PUMA TK Indoor SummerBeautiful and charming Rieker 41395 Doris 95 , Win highly appreciated ASICS Tiger Gel-Mai™Earth Ronan Your out on the town look gets a spicy upgrade with the Ronan from EarthMIA Alma You'll adore the versatile and casual style of the MIA Alma clog! ,
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.