Barclays’ head of macro research, Ajay Rajadhyaksha, believes that a sustained bond rally will only be triggered by a stock selloff. Retail investors have already started dumping their bond holdings in ETFs, as noted by Pimco co-founder Bill Gross. Hedge fund manager Harris “Kuppy” Kupperman, founder of Praetorian Capital, agrees with this sentiment and sees no bottom for bonds. He argues that the bond market is not panicky and believes that yields could reach as high as 6%, and possibly even the teens, unless the government demonstrates fiscal sanity. Kupperman also warns that high yields could cause significant pain for businesses that need to fund themselves. Rather than focusing on the stock market, Kupperman is more bullish on “real economy” investments like uranium.
Kupperman’s bearish outlook for bonds is driven by his belief that the bond market is not reflecting the strength of the economy. He argues that a 4% yield on 10-year Treasury bonds is too low given the current economic conditions, and that a 6% yield would be more reasonable. Furthermore, he warns that high yields could have negative consequences for businesses that have to fund themselves with bonds. Kupperman predicts that this could lead to a stock market sector rotation rather than a crash. Instead of focusing on stocks, Kupperman sees opportunities in the “real economy,” and has been a long-time supporter of uranium investments. He believes that the world will eventually turn to nuclear power as the best solution for baseload power generation, leading to a spike in uranium prices.
Overall, Kupperman’s outlook is bearish on bonds and suggests that a sustained bond rally is unlikely without a stock selloff. He argues that high yields are necessary to reflect the strength of the economy, and believes that the bond market is not currently pricing in this reality. Kupperman also warns that high yields could have negative consequences for businesses that rely on bonds for funding. Instead of focusing on stocks, he sees opportunities in the “real economy,” particularly in uranium investments.
