S&P 500 has lost over 2.0% in recent days and the downside will continue to unfold moving forward, says Dan Niles – the Senior Portfolio Manager of the Satori Fund.
U.S. job market continues to be strong
Last week, the U.S. Bureau of Labour Statistics said nonfarm payrolls nearly doubled in January versus the previous month as Invezz reported HERE.
That created more room for the Fed to keep rates higher for longer, which, in turn, paints a rather dingy picture for the equities market. To that end, Niles named “cash” as his top pick for 2023.
When thinking about my top picks, first thought that came to mind was how volatile this year could be. Particularly for those who can’t trade daily, cash is king. Sitting on cash allows flexibility to reinvest if the S&P 500 goes lower.
Year-to-date, the benchmark index is still up roughly 7.0%.
Fed is not going to cut rates this year
Specifically, Niles recommends that investors put their money in the 3-month Treasury Bills that currently yield about 4.5%. Just days ago, influential investor Ray Dalio also picked cash over stocks.
He’s convinced that the U.S. stocks will tumble once the market starts to believe that rate cuts, indeed, were not on the cards for 2023. In a recent interview with CNBC, Niles said:
I think that’s where the disconnect is. By the time you get to mid-year, and it becomes apparent that Fed isn’t going to be cutting, that’s when the unfortunate realization will be that the Fed won’t help you out like people want.
Remember that Fed Chair Powell already signalled earlier this month that rate cuts were not very likely this year.
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