Hedge fund manager David Neuhauser says that markets look “artificially high” right now, and are staging a bear market rally that will not last. Neuhauser, founder and CIO of Livermore Partners, said the recent bounce was a technical rally off lows and does not mark a sustainable recovery in markets. “I think, at this point in time, you’re reaching the upper bounds of this rally, and I would expect it to fade here in the coming weeks,” he told CNBC’s “Squawk Box Europe” on Friday. Major U.S. indexes have been in a bear market — or over 20% off recent peaks — for much of this year, with the S & P posting its worst first half since 1970 . In July, however, stocks have rallied, and many on Wall Street have been debating if the bear market is over. On Friday, the S & P 500 clinched its fourth straight positive week — its longest weekly winning streak since November 2021. However, Neuhauser argued it will transpire to be a temporary move higher. “I think ultimately, more than likely, we’re gonna be in a bear market for quite some time. And I think the economy will dip into recession — how deep, how far, how fast, it’s unsure.” Why Neuhauser is so bearish on markets Neuhauser said that the current market has not been operating on fundamentals for a while, with “all the money that’s been pumping the system.” Central banks globally embarked on a campaign of ultra-loose monetary policy in response to the coronavirus pandemic, although many have tightened in recent months. As such, Neuhauser said the investing landscape had changed. “And I think until they really truly understand that shift, markets are going to be fairly range bound.” The U.S. Federal Reserve rolled out its second consecutive 0.75 percentage point rate increase in July. And Neuhauser said he doesn’t “see them taking their foot off the gas,” with policymakers “only be about halfway done where they need to be.” With interest rates set to go higher, the increased cost of borrowing will hit some weaker companies, according to Neuhauser. “The valuations ultimately are going to … head back down to near the lows of the move,” he added. “And I think it’s just going to create a much more challenging backdrop, not just for the next several months either. I think this is going to go on for the next several years.” How to position Livermore Partners is “heavily invested” in commodities, and in particular, energy. “We still think that it’s has been the one sector that has been the correct call because it’s been under invested, there’s been structural issues as far as supply, strong demand, and prices are very elevated,” he told CNBC. Oil prices soared last year amid a broad rise in most commodities, and jumped higher after the Russia-Ukraine war. Crude prices recently dipped back below $100 a barrel, but remain over 40% higher than a year ago. On the flip side, Neuhauser said he’s been negative on tech stocks for the past two years and it’s been ‘the correct call.” The tech-heavy Nasdaq Composite has staged a rally since mid-June, but is down almost 12% on the year.