As investors try to find their footing after recent bouts of hyper-volatile trading, portfolio manager Dan Niles is cautioning patience. "You can't fix all your positioning problems in one day," the founder and portfolio manager at Niles Investment Management told CNBC's "Closing Bell Overtime" on Wednesday.
The S & P 500 logged a 9.5% advance to close at 5,456.90 -- its biggest one-day gain since 2008 and third biggest rally in post-war history -- after President Donald Trump put a 90-day pause on the tariff plans he unveiled only last week. The Dow Jones Industrial Average and Nasdaq Composite also soared 7.9% and 12.2%, respectively. The administration's new policy still extends levies of 10% on most countries, and a staggering 125% tariff on China. But investors appeared encouraged that the president was continuing trade talks.
Despite the stunning turnaround, finding a new bottom in the market won't happen overnight, according to Niles. "Bottoming is not a day. It's like a process," he explained. "You can't work through these issues in short periods of time." Niles likened what comes next to the period that followed the Lehman Brothers bankruptcy in 2008. "Then, the government made a huge mistake as well," he said, recounting that there were several volatile trading days that occurred as the government corrected course. "Luckily, we know where the Trump put is, quote, unquote, down at these levels. But you know eventually earnings are going to matter and I don't like investing when earnings are going down," he said.
Niles is looking for the S & P 500 to return to around 5,700, which was where it was prior to Trump's April 2 announcement. The money manager is also watching for the Cboe Volatility Index , or VIX, to return to the mid-20s range. On Wednesday, the so-called fear gauge ended the day at 33.62. Once these conditions are met, Niles expects that investors can return to focusing on fundamentals.
Another important sign will be how the market reacts to bank earnings that are due out starting on Friday morning. "That'll give you another tell as to, you know, where are we in terms of this repositioning trade," he said.