Things could 'get ugly' early next year after year-end rally runs its course - Satori's Dan Niles
Noah Berger

Satori Fund founder Dan Niles said Monday that conditions for the stock market could "get ugly" again in early 2023, as equities get pulled down by the impact of higher interest rates and weakening demand.
Speaking to CNBC, Niles predicted a "last gasp" rally between now and Christmas, as China emerges from recent COVID-related social unrest and inventors engage in FOMO buying. However, after the holidays, he expects companies to issue negative surprises during the next pre-announcement period, sparking renewed selling pressure.
"We still believe that after you get, sort of, this bear market rally kind of running its last gasp, that you go and retest or break to new lows when you get into 2023," he said.
The S&P 500 (SP500) (SPY) closed Monday's trading just below the 4,000 mark, at 3,998.84. In October, the index reached a 52-week low of 3,491.58.
Looking at specific stocks, Niles said that enterprise software companies will run into difficult times in early 2023, including big names like Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), Zoom Communication (NASDAQ:ZM) and Microsoft (NASDAQ:MSFT).
Niles noted that during the pandemic customers needed software to increase their ability to run remote operations. However, after three years, the need for cloud computing resources has declined. As a result, companies have reduced their capital expenditure, a trend exacerbated by layoffs. These factors have lowered the demand for these software offerings, he stated.
Specifically looking at Amazon (AMZN), Niles said the megacap's cloud computing unit, Amazon Web Services, will slow down more in 2023 amid macro uncertainty.
Niles sees AWS revenue growth rate coming in high teens next year after the company said it has exited the Q3 with 25% growth rate, its slowest since 2014.
For the quarter, the AWS division recorded growth of 27.5%, with revenue rising to $20.5B. This outpaced Amazonâs overall growth of 15%.
Niles contended that companies are looking for reasons to cut back on their cloud computing expenses, in part due to rising interest rates and emerging recession fears. As an example of this, he pointed to Salesforce (CRM), which cut its outlook for business growth to 7% vs. previous view of +11%.
Here are some related sector ETFs: the SPDR S&P Retail ETF (NYSEARCA:XRT), Vanguard Information Technology ETF (VGT),
iShares Expanded Tech-Software Sector ETF (IGV), iShares Trust - iShares Expanded Tech Sector ETF (IGM), SPDR Series Trust - SPDR S&P Software & Services ETF (XSW)
and Technology Select Sector SPDR ETF (XLK).