Hedge fund manager Dan Niles said he expects the stock market to decline by the middle of this year as the Federal Reserve chooses to keep interest rates on hold for longer. Niles, founder and senior portfolio manager of the Satori Fund, told CNBC’s “Street Signs Asia” Thursday that there is a “disconnect” between market expectations and the US central bank’s messaging. His comments echoed Fed Chairman Jerome Powell, who said he did not expect to cut rates this year after the central bank raised interest rates by 25 basis points Wednesday. However, interest rate swap data shows that a significant proportion of the market expects a cut in the base rate by the middle of this year. “I think that’s where the disconnect is,” Niles said. “Services, excluding housing, are still getting strong inflation because the labor market is just so strong, and it’s over 55% of the core inflation numbers the Fed is looking at.” “I think when you get to the middle of the year, and it becomes clear that the Fed is not going to cut, that’s when the unfortunate reality is that the Fed is not going to help you as much as people want. ,” he added. .SPX 1Y line Niles said that hedge funds, which focuses on technology, achieved positive gains in 2022 despite a 19% decline in the S & P 500 and a 33% decline in the Nasdaq. The current situation echoes the events seen in the 1970s, he added, when predictions of premature rate cuts led to an increase in inflation and rose in the 1980s to regain control. As a result, some stock markets lost a third of their value. However, despite the bearish outlook, hedge fund managers say there are some tailwinds in the near term for the US, such as the Fed pausing after two more rate hikes , slowing inflation, and the reopening of China. Earlier this year, Niles named the top defensive stocks to prepare for a steep market decline. He previously said that the S&P 500 will fall to 3,000, more than 25% below current levels. – CNBC’s Weizhen Tan contributed to this report.