An investor who warned his clients ahead of time about his concerns over the coronavirus and its eventual impact on global markets before the S&P 500 plunged 30 per cent says stocks may be heading for another significant drop.

Hedge fund manager Dan Niles adjusted his positions early enough so that his Satori Fund emerged without without a loss after the historic market collapse in March which marked the fastest 30% sell off ever.

Niles said his long short fund was spared after he had looked back and found there were nine times the market sold off about 30 per cent since the 1920s, and that every time there were bear market rallies.

Followed my strategy of selling/shorting w/ S&P rallying 6.5% off morning lows. Then w/ S&P dropping 5% in last hour bought at the close 2 new positions (GILD ZM) & added to AMZN. Benefit from virus& work/stay at home but also like longer-term. Plan to short/sell more on a bounce https://t.co/iseBYQ1o8Y

— Dan Niles (@DanielTNiles) March 17, 2020

Pointing to the Great Depression, as an example, Niles says the average gain over the bear market rallies totaled 24 per cent compared to drops that were averaging 33 per cent on what ended up being an 86 per cent top-to-bottom collapse.

“So these rallies kept sucking investors back in, you know, in the sense that you thought it was over and then you got worked over,” he told Yahoo Finance.

Niles says he expects a repeat will happen to investors who bought in the last week of March as lawmakers responded to the coronavirus crisis with a $2 trillion stimulus package that caused the S&P 500 to bounce back by 18 per cent off its low.

The same rally likely included pension funds rebalancing during the end of the first quarter, Niles says.

U.S. stocks opened flat on Thursday as investors hoped for an end to the oil price war and shrugged off another surge in U.S. jobless claims spurred by the coronavirus pandemic.

There have been more than 236,000 confirmed cases in the US of the coronavirus, which has been blamed for 5,647 deaths.

Initial claims for unemployment benefits rose to 6.65 million in the latest week from an unrevised 3.3 million the previous week, the U.S. Labor Department said on Thursday.

Reviewing the nine times in the last 30 years when the S&P diverted from bond market performance more than 10 per cent, Niles says that in the last five trading days of Q1 the S&P has rallied to return 6.8 per cent.

And that would almost align with the S&P’s 7.3 per cent rally through Wednesday’s open.

Once the pension fund rebalancing starts, stocks historically have declined an average of about 1.1 per cent during the first five of trading of the new quarter, advancing less than 25 per cent of the time.

When the S&P 500 fell 4.5 per cent on Wednesday, it was on track to repeat that history.