Dan Niles says he's got over 25% in cash and that's his favorite asset for retail investors

Published Wed, Mar 9 202210:17 AM EST

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Dan Niles told CNBC on Wednesday he thinks the market may have reached a short-term bottom, but he stressed the Federal Reserve's policy tightening still has him negative over an extended horizon. "If you don't have the time to manage this or the stomach to deal with this on a day-to-day basis, be in cash," the Satori Fund founder and senior portfolio manager said on "Squawk Box." "It's my favorite position for the retail investor, and we have a lot of it sitting in our fund," Niles said, explaining his tech-focused, long/short fund has "well over 25% sitting in cash." The hedge fund manager went further on how he's handling the market right now: "We add shorts when the market gets to levels we think are too high. … Then we've got about 17 different metrics we look at that tells when the market is getting oversold, so we cover the shorts, which raises the cash level. Then we've have a core group of longs that we're always moving around depending on what's happening — obviously, Russia changes a lot of things — and that's how we manage it." Niles said he recognizes, of course, that the approach he uses is not suitable for every type of investor. "For the average retail investor, my thing is don't be in the market. Sit on cash. Wait for this to play through," said Niles, who has called for the S & P 500 to fall at least 20% peak to trough as investors process a more aggressive Federal Reserve. Wall Street has struggled to start the year, but it hasn't yet fulfilled Niles' bear-market prediction. Indeed, on Tuesday , the Dow Jones Industrial Average and the S & P 500 slipped further into correction territory, while the Nasdaq Composite fell deeper into a bear market. "Don't forget, we're sitting at unemployment below 4%. The Fed is still expanding their balance. They haven't actually started to letting that run off yet, shrinking it, selling securities, raising rates," Niles said. "You've got valuations sitting near record highs at 1.8 times market cap to GDP, so if you think this is over right now and this is the bottom, I find that hard to believe."

Daniel Niles

John Chiala | CNBC

Dan Niles told CNBC on Wednesday he thinks the market may have reached a short-term bottom, but he stressed the Federal Reserve's policy tightening still has him negative over an extended horizon.