Hedge fund manager Dan Niles said he expects stocks to lose a lot before reaching lower levels as corporations turn to disappointing earnings and weak forecasts. “You don’t want to fight the fundamentals,” Niles said Tuesday on CNBC’s “Squawk Box.” “I think in terms of the guidance you’re going to give for Q3, you’re going to see Q2 earnings absolutely terrible because you’re dealing with slow growth at the same time as you deal with higher inflation affecting their businesses. are tackling.” The founder and senior portfolio manager of the Satori Fund highlights recent examples of negative publicity from large companies including Target and Microsoft. Earlier this month, Target warned investors that its profits would take a short-term hit, as it flagged unwanted items, canceled orders and took aggressive steps to get rid of excess inventory. Microsoft recently lowered its fiscal fourth-quarter estimates, citing unfavorable foreign exchange rate movement. “P/E multiplies very quickly in a high inflation environment contract, and that is why I think we are still going to go down 30% to 50% until sometime next year when we are in the middle of a recession. Sitting down,” Niels said. The key average hit its 10th losing week in 11 on fears that the Federal Reserve would raise rates aggressively to tame inflation at the risk of an economic downturn. The S&P 500 dropped 5.8% last week for its biggest weekly loss since March 2020. The equity benchmark is now up over 21% from its record high since early January after rebounding on Tuesday. The Fed raised interest rates by three-quarters of a percent, the central bank’s biggest increase since 1994. The central bank reiterated its commitment to fight rising inflation at a four-decade high. Niles said, “You don’t want to fight the Fed. The Fed is going to be the most aggressive since the 1970s to try to bring down inflation.” The hedge fund manager said one of the only bright areas in the market right now are Chinese tech companies, especially Internet names, as Beijing eases technology crackdowns.
Related
