Hedge fund manager Dan Niles said he expects stock markets to fall by the center of this 12 months because the Federal Reserve opts to maintain rates of interest higher for longer. Niles, founder and senior portfolio manager of the Satori Fund, told CNBC’s “Street Signs Asia” Thursday that there was a “disconnect” between market expectations and the U.S. central bank’s messaging. His comments echo Fed Chair Jerome Powell, who said he doesn’t expect to chop rates this 12 months after the central bank raised rates of interest by 25 basis points Wednesday. Nevertheless, rate of interest swap data shows that a big proportion of the market expects a cut in the bottom rate by the center of this 12 months. “I believe that is where the disconnect is,” said Niles. “Services, excluding housing, has still got strong inflation since the jobs market is just so strong, and that is over 55% of the core inflation numbers that the Fed looks at.” “I believe by the point you get to mid-year, and it becomes pretty apparent that the Fed just isn’t going to be cutting, that is when the unlucky realization goes to be that the Fed just isn’t going to enable you out like people want,” he added. .SPX 1Y line Niles said his hedge fund, which is tech-focused, had positive gains in 2022 despite a 19% decline within the S & P 500 and a 33% decline within the Nasdaq . The present situation echoes events seen within the Seventies , he added, when premature rate cut predictions led to a surge in inflation and eventual hikes through the Nineteen Eighties to bring it back under control. Because of this, some stock markets lost a 3rd of their value. Nevertheless, despite his bearish outlook, the hedge fund manager said there could possibly be several tailwinds within the near term for the U.S., comparable to the Fed pausing after two more rate hikes, inflation slowing, and China’s reopening. Earlier this 12 months, Niles named his top defensive stocks to organize for a possible steep market decline. He has previously said he expects the S & P 500 to fall to three,000, greater than 25% below its current level. — CNBC’s Weizhen Tan contributed to this report.
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