Dan Niles, founder of Niles Investment Management, has recently named cash as a top investment pick for the first time since 2022, when aggressive Federal Reserve rate hikes led to market declines. With current inflation rates between 2.5% and 3%, he suggests that cash could serve as a safe haven, offering approximately 4% yields in money market funds. Niles expressed cautious optimism, noting that the market’s performance this year hinges on inflation dynamics, and he anticipates a wide range of outcomes with a possible 10%-20% drop or a 10% gain. Valuations are high, with the S&P 500 trading at nearly 22 times forward earnings—the highest since 2021—signaling limited maneuverability. Despite a December downturn, the S&P 500 ended 2024 up over 20%, reaching record highs. Additionally, Niles identified midcap value stocks as a viable option, predicting they could outperform if investor interest shifts from large tech companies. He highlighted their defensive nature, especially during market corrections, and noted specific stocks he favors, including Cisco, Adtran, and certain bank stocks, citing their better profitability and resilience to rising interest rates.
