The S&P 500 index has recovered 5.0% from its low of 4,300 on Friday, but Satori Fund’s Dan Niles warns it’s too early to say that the worst is in the rearview mirror.
Reasons why Niles remains concerned
According to Niles, periodic rallies are a characteristic of a bear market, which by no means suggests that the market has bottomed. This morning on CNBC’s “Squawk Box”, he said:
The most comparable period is when Paul Volcker took over. 1980, you had a sell-off as he started to battle inflation, and the market went down 27% in 21 months. But you had six rallies of 8.0% on average during this period. It’s what happened in all of the three high inflationary periods.
Niles remarks come more than a week after billionaire investor Jeremey Grantham said the U.S. stocks are in a “superbubble” and that he was almost certain that SPX will crash to 2,500 level.
Up to seven rate hikes are on the table
With inflation at record levels, the Bank of America is looking at up to seven rate hikes this year, which could mean more downside for the benchmark index, Niles added.
The Fed hasn’t even started hiking yet or cutting their balance sheet. That’s still in front of us. And valuations are still near record levels. You combine all of that with slowing growth because of high energy prices, high wages, and high rents, I think it’s too early to say this is the bottom.
The senior portfolio manager expects oil prices to go further up and has United States Oil ETF (USO) as his top pick for 2022.
