Several asset classes have skyrocketed since the Federal Reserve turned on the monetary tap last year. And now there is little value left in the markets, hedge fund heavyweight David Tepper said on Friday.
“I don’t think it’s a good investment here,” the founder of Appaloosa Management told CNBC, referring to stocks.
“I just don’t know how interest rates are going to behave next year … I don’t think there are any major asset classes right now … I don’t like them. actions. I don’t like links. I don’t like junk bonds.
The Fed’s federal funds rate target sits at an all-time high of zero to 0.25%. About half of central bank policymakers expect a rate hike this year, but the other half don’t anticipate a move until next year.
The S&P 500 hit an all-time high of 4,560 on Friday, but earnings growth may have peaked.
Fed officials have indicated they may start cutting central bank bond purchases next month. If bond yields don’t rise at this point, stocks could rise in response, Tepper said.
“If we’re going to sit here with 1.60% [on the 10-year Treasury yield] after the Fed announces a cut, then you could get a rally. There could be a trade rally. You could get 5% to 10% more. I’ll go in and out.
The 10-year Treasury recently fell 1.66%, down 2 basis points. It has climbed 49 basis points since August 2.
Tepper’s advice now: “I think you need to stay invested in the stock market to a degree, but don’t have the highest concentration you’ve ever had,” he said.