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.Stelle Monelle® Ankle Boot - Women Stelle Monelle® Ankle Boots online on YOOX United Kingdom - 11523099EA , Via Vela 14 Loafers - Women Via Vela 14 Loafers online on YOOX United Kingdom - 11542692NHwomens Dolce&Gabbana Dbb Formal Shoes durableSee by Chloé SB23005 GreyGeorge J. Love Ankle Boot - Women George J. Love Ankle Boots online on YOOX United Kingdom - 11537624LCNew Balance 999 Riviera Pack - Sneakers - Women New Balance Sneakers online on YOOX United Kingdom - 44989954PPladies Stuart Weitzman Navy Platswoon Wedges Buy online , Zara Black With Tags - Glossy SandalsMISS - N3220025 Covent Sneakers Strong value , Billi Bi Ankle boots Colour: black/silverDenim trainers with embroidered flowers , blue, La Redoute Collections , men's/women's Aerosoles Mythology Boots Modern and elegant fashionPedro Miralles TEXAS - Mules Colour: amalfi rojo , Tommy Hilfiger PEARLIZED - Ballet pumps Colour: grey , Napapijri Sneakers - Men Napapijri Sneakers online on YOOX United Kingdom - 11509430IXAdidas Steve Madden GAZE - High heeled ankle boots - white , Adidas Melvin & Hamilton JESSY - Ankle boots - black , Mizuno WAVE EQUATE - Stabilty running shoes Colour: ombre blue/black/green slime , Voile Blanche Sneakers - Men Voile Blanche Sneakers online on YOOX United Kingdom - 11580782FF2Star Sneakers - Women 2Star Sneakers online on YOOX United Kingdom - 11453500SI , Yin Sandals - Women Yin Sandals online on YOOX United Kingdom - 11577419ASCalpierre Loafers - Women Calpierre Loafers online on YOOX United Kingdom - 11579417MH , Lumberjack Sneakers - Women Lumberjack Sneakers online on YOOX United Kingdom - 11514531RH , Paloma Barceló Sandals - Women Paloma Barceló Sandals online on YOOX United Kingdom - 11422989AC , Acne Studios Loafers - Women Acne Studios Loafers online on YOOX United Kingdom - 11523809KB , Various types and styles Eric Michael AmeliaJoie Tanglee Add some retro-inspired flair into your outfits with the Joie Tanglee platform sandal , Lord & Taylor Red Garnish Leather Sling Back Open Toe And Sandals , Tory Burch Blue/White Nwb Wedge Flip Flops SandalsWOMEN Sam Edelman Red Tanya Sandals Selected materials
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.