Dan Niles sees a ‘last gasp’ rally between now and Christmas before things get ugly again in 2023

Hedge fund manager Dan Niles said the market is in another bear-market rally and investor sentiment could turn sour again in the new year. “I think you’re going to see a rally between here and Christmas, because you do have a lot of positives in the sense that you’ve got the fear of missing out,” Niles said on CNBC’s ” TechCheck ” on Monday. The founder and senior portfolio manager of the Satori Fund said another catalyst is investors adding exposure to Chinese stocks after the country started to ease its Covid Zero policy. The S & P 500 gained more than 1% last week, posting its second positive week in a row. The benchmark is still down 15% this year. Niles believes after the year-end rally, stocks could see more losses as corporate earnings are about to deteriorate. “The problem is you’re going to get to the end of this year, and then you’re going to have to report numbers and you’re going to enter pre announcement period. And I think that’s when things get ugly,” Niles said. A series of aggressive rate hikes will affect demand negatively and cause a slowdown in earnings, Niles said. The Federal Reserve started in March to aggressively hike rates and fight inflation running at the fastest pace since the early 1980s. “We still believe that after you get sort of this next bear market rally running, it’s last gasp, then you go and retest or break to new lows when you get into 2023,” Niles said. “Our view is no different that this is just another bear market rally, but trying to take advantage of that things are going pretty well.”