Fund manager Dan Niles suggests the recent stock market rally may be running out of steam as pull-forward demand artificially boosted first-quarter results and economic uncertainties mount.
What Happened: Niles, founder of Niles Investment Management, shared on X that the S&P 500, as tracked by SPDR S&P 500 SPY has rallied 14% from its April 8 lows through May 2, driven by “better than feared guidance during earnings season and hopes of 90 trade deals in 90 days.”
However, he now believes “there is not much upside left to this rally,” noting troubling signs as even strong performers like Amazon.com Inc. AMZN and Apple Inc. AAPL declined on Friday despite beating quarterly expectations.
“It would not surprise me if the actual announcements turned into sell the news events,” Niles wrote.
Niles highlighted the staggering 41% year-over-year increase in imports reported in first-quarter Gross Domestic Product data, suggesting significant demand pull-in ahead of tariffs that “will eventually need to be paid back in future quarters.”
He drew parallels to previous bear market rallies, noting the S&P had 11 rallies of 10% on average during the Global Financial Crisis while ultimately losing 57% over 18 months.
Why It Matters: The market slide could present a buying opportunity for a “technical bounce back,” though Niles maintains “fundamental concerns for the longer-term,” according to his previous statements.
With the S&P’s trailing price-to-earnings ratio now at 24 times and economic uncertainty “higher today than back then,” Niles believes earnings estimates will ultimately decline for the second half of 2025.
Niles previously excluded all “Magnificent 7” tech giants from his top stock picks for 2025, citing “disappointing first-quarter earnings outlook” among his reasons.
He also pointed to Berkshire Hathaway Inc. growing its cash position to $348 billion while being a net seller of stocks for 10 straight quarters, reflecting “caution also on Warren Buffett‘s part.”
Among tech leaders, Niles has previously noted that “‘Magnificent 7’ tech giants have fallen from grace in 2025.”
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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