Investors will be “hurt” by investing in long-dated bonds now, says venture capitalist Kevin O’Leary.
His comments come hours after the Federal Reserve hiked interest rates by 75 basis points – the most aggressive hike by the central bank since 1994.
“I wouldn’t buy bonds here,” O’Leary, chairman of O’Leary Ventures, told CNBC’s Squawk Box Asia on Thursday.
“I’m not going to commit capital at 3.5 percent for 10 years. That’s a terrible return when the markets have traditionally given me 6% to 9%,” he said.
Right now, I prefer stocks, particularly the 100 companies in the S&P 500 that have very strong balance sheets
Kevin O’Leary
Chairman, O’Leary Ventures
“Is there anything on the fixed income scale that I think makes sense? Not yet,” O’Leary said.
“Right now, I prefer stocks, particularly the 100 companies in the S&P 500 that have very strong balance sheets. Very strong cash flows, paying dividends that haven’t seen this so-called recession yet,” the investor said.
Global markets have tumbled in recent weeks as investors scramble for safety amid mounting concerns – from aggressive US policy tightening to a global recession and the economic fallout from ongoing lockdowns in China, as Beijing continues sticking to its zero Covid strategy.
On Wall Street, the S&P 500 went bearish earlier this month and is down more than 20% so far this year.
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For his part, O’Leary said he doesn’t see a “dramatic recession” ahead.
“There’s a lot of naysayers, there’s a lot of people talking about the end of the free world as we know it and the darkness and all that and the crypto meltdown and yada yada yada,” the Shark Tank investor said .
“I’m not there because I’m dealing with numbers every week, what consumers are buying with the money they have, they’ve gotten so much of it over the past three years.”
The economy remains strong and, according to O’Leary, can absorb rate hikes by the US Federal Reserve.
“If the Fed ended up at 4%, that’s still historically low. That’s not crazy and we’re talking about that.”