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.J|D Julie Dee Loafers - Women J|D Julie Dee Loafers online on YOOX United Kingdom - 11353531GO , Giuseppe Zanotti Ankle Boot - Women Giuseppe Zanotti Ankle Boots online on YOOX United Kingdom - 11208563PNAnaid Kupuri Ankle Boot - Women Anaid Kupuri Ankle Boots online on YOOX United Kingdom - 11552671UBL' Autre Chose Sandals - Women L' Autre Chose Sandals online on YOOX United Kingdom - 11140683NR , FreeBird Black/Tan Women's Claw Heeled SandalsChie By Chie Mihara Bri-Tejo - Sandals - Women Chie By Chie Mihara Sandals online on YOOX United Kingdom - 11429582QCGiorgio Brato + Veeshoo Sneakers - Men Giorgio Brato + Veeshoo Sneakers online on YOOX United Kingdom - 11461388BINew Balance 1550 Omni - Sneakers - Men New Balance Sneakers online on YOOX United Kingdom - 11089107RK , MTNG 52587 C19375 Lodiz Negro BOTA OUTDOOR PARA MUJERODGI-TRENDS 729850-b7200 White-silver WEDGE-HEEL SANDALS FOR WOMENman/woman XOXO Henrietta Clogs & Mules Cost-effective , men's/women's RAYE Aida Heels High security , Redskins ISALI - Trainers Colour: noirUa sk8-mid reissue high top trainers , black, Vansman/woman Nike Hyperdiamond 2 Elite Sneakers & Athletic Nike leading the fashion , Kurt Geiger London | Kurt Geiger London Route Leather Monk ShoesVirtus Palestre Sneakers - Men Virtus Palestre Sneakers online on YOOX United Kingdom - 11185436FATod's Loafers - Women Tod's Loafers online on YOOX United Kingdom - 11397173CT , Ruco Line Sneakers - Women Ruco Line Sneakers online on YOOX United Kingdom - 11227805FNBalmain Ankle Boot - Women Balmain Ankle Boots online on YOOX United Kingdom - 11551296SW , Bianca Di Court - Women Bianca Di Courts online on YOOX United Kingdom - 11547640UB , Ras Ballet Flats - Women Ras Ballet Flats online on YOOX United Kingdom - 11090561DAOff-White™ White Airmax 97 Off-white Sneakers , Jimmy Choo Black Patent Leather SandalsWOMENS Prada Black ? Platforms tenderek2ULERX SIXTYSEVEN S044479600bpi ZAPATILLA CON PLATAFORMA , Kork-Ease Velma Update your wardrobe with this distinctive Kork-Ease designALDO Roxbury No matter the occasion, the ALDO Roxbury will be the perfect finishing touchIsabel Marant Black - Bobby Calfskin Velvet Leather Sneakers Sneakers , Tory Burch Pink Perfect Blush Annabelle Suede Bow Slide 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.