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David Tepper, founder of Appaloosa Management whose comments are known to mess with the markets, said it is very difficult to be pessimistic in stocks now and believes that the liquidation of Treasury bills, which boosted interest rates, has probably ended.
The main market risk has been removed, Tepper said, adding that rates are expected to be more stable in the short term.
“Basically, I think the rates have temporarily taken advantage of the change and are expected to be more stable in the coming months, which makes it safer to be in stocks for now,” Tepper told Joe Kernen of CNBC, who shared the comments in the “Squawk Box . “
Bond yields have increased dramatically in recent weeks amid higher inflation expectations, which have put pressure on risky assets. The 10-year Treasury yield rose from 1.09% at the end of January to above 1.60% on Monday. The rapid advance in yields hit technology stocks particularly strongly, as these companies relied on easy loans for superior growth.
Tepper believes that Japan, which was a net seller of Treasury bills, could start buying US government bonds again after rising yields.
“It takes a lot of risk from the table and it is very difficult to be a bass player,” Tepper told Kernen.
Another catalyst for bullish stocks in the short term is the fiscal stimulus package that has just been approved by the Senate, Tepper said.
The Democratic-controlled House is expected to approve the $ 1.9 trillion economic relief and stimulus bill later this week. President Joe Biden is expected to sanction it before unemployment benefits expire on March 14.
The hedge fund manager also said that “thermometer” stocks like Amazon are starting to look attractive after the downturn. The e-commerce giant’s shares fell 9.7% last month.
A year ago, before stocks really started to fall because of the pandemic, Tepper warned that the virus could be a game changer for markets.