David Tepper, founder of Appaloosa Management, who are known to move the markets, said it is very difficult to be bearish for stocks at this point and thinks the sell-off in government bonds that has pushed up interest rates is likely to be over.
The main market risk has been mitigated, Tepper said, adding that rates should be more stable in the near term.
“In essence, I think prices have temporarily made the most of the move and should be more stable in the coming months, making it safer to be on stocks for now,” Tepper told CNBC’s Joe Kernen, who commented on Squawk Box shared.
Bond yields have risen sharply in recent weeks due to higher inflation expectations, putting risky assets under pressure. The yield on 10-year Treasury bonds rose from 1.09% at the end of January to above 1.60% on Monday. The rapid rise in revenues hit tech stocks in particular, as these companies relied on easy borrowing for superior growth.
Tepper believes Japan, which had been net sellers of government bonds, could return to buying U.S. government bonds after interest rates rise. The potential purchasing power could help stabilize the bond market, Tepper said.
“That takes a big risk off the table, and it’s very difficult to be bearish,” Tepper told Kernen.
Another positive catalyst for equities in the short term is the fiscal stimulus package just approved by the Senate, Tepper said.
The Democrat-controlled House is expected to pass the $ 1.9 trillion in emergency economic aid and stimulus bill later this week. President Joe Biden is expected to sign it into law before unemployment assistance programs expire on March 14.
The hedge fund manager also said “bellwether” stocks like Amazon are starting to look attractive after the downturn. Shares of the ecommerce giant are down 9.7% in the past month, while Apple is down more than 11% over the same period.
A year ago, before stocks really started to plummet due to the pandemic, Tepper warned that the virus could be a game changer for markets.