The recent collapse in bond prices following Donald Trump's election is signaling the end of the three-decade-old bull market in fixed income, closely followed value investor Bill Miller told CNBC on Tuesday.
The money leaving bonds should find its way into the stock market, the founder, chairman and CIO of Baltimore-based LMM added.
"The over-investment in bonds is going to switch somewhere," he said. "I think a large part is going to go to equities like it did in 2013."
"Stocks are already discounting probably 3 to 4 percent [on the] 10-year [bond yield]," Miller said. "So you have clear sailing for another 75 basis points easy." He noted that "it depends on the growth rate."
But don't expect the stock market bull run that began in March 2009 to last forever, Miller warned. "It will last, as secular bull markets, do until it becomes too expensive, relative to the alternatives."
"If rates move up, as I would expect, over next couple of years to ... 3 or 4 percent on the 10-year [Treasury bond], assuming good economic growth, and if the stock market moves up ... from 18 to 22 [or] 23 times [earnings], it'll be pretty much over," he said.
Bull markets "die of valuation excesses," he stressed.
In the short term, however, Miller said the surge in stocks in the wake of Trump's unexpected victory was not so surprising and was "sensible."
Miller's LMM, a partially owned subsidiary of Legg Mason, has $2 billion in assets under management. He's also portfolio manager of the top-performing Legg Mason Opportunity Trust fund.