As S&P 500 Charges Off April Lows, Dan Niles Says Investors Will 'Forget About Valuations'—Holds Microsoft, Nvidia, Cisco But Sees Holiday Demand Crash Risk

The S&P 500 hit record highs on Friday as prominent investment manager Dan Niles advised investors to temporarily ignore traditional valuation metrics while positioning for continued market gains through the second-quarter earnings season.

What Happened: Niles, founder of Niles Investment Management, reversed his earlier bearish stance after the index rallied 27% from April lows following President Donald Trump‘s 90-day tariff reprieve announcement. The benchmark index surpassed its previous February closing high, rebounding from a 21% selloff that began in early April amid tariff fears and recession concerns.

“In my 35 years on Wall Street I have NEVER said that before,” Niles wrote on X, clarifying his CNBC interview comments about forgetting valuations. He emphasized that this tactical approach reflects how he believes investors will behave until Thanksgiving, not his personal investment philosophy.

The veteran money manager cited seven factors driving continued market strength: U.S. dollar weakness helping foreign sales that comprise 40% of S&P 500 revenues, demand pull-forward ahead of potential tariffs, reduced geopolitical tensions, anticipated Federal Reserve rate cuts, institutional performance chasing, and retail fear-of-missing-out with $7 trillion parked in money market funds.

See Also: China’s Ant Group Boosts R&D Spending To Record $3.26 Billion In 2024 Amid AI Push

Why It Matters: Niles maintains positions in Microsoft Corp. MSFT, Nvidia Corp. NVDA, and Cisco Systems Inc. CSCO. He highlighted Microsoft’s re-accelerating Azure growth after three quarterly disappointments and Nvidia’s demand strength following a $5.5 billion writeoff. Cisco trades at 17x forward earnings versus 24x for the S&P 500, despite its emerging AI networking capabilities.

However, Niles warned of potential 10-20% correction risks approaching Thanksgiving due to holiday demand disappointment from the first-half demand pull-forward. He noted the S&P 500’s 24x forward price to earnings ratio exceeds historical averages during 2.4-3.0% inflation periods.

The index closed Friday at 6,190, with technical analysts noting an approaching “golden cross” signal when the 50-day moving average crosses above the 200-day average—historically preceding strong rallies 73% of the time since World War II.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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