Market Strategist Warren Pies on Stock Trends: Key Signals to Watch

A Cautious Outlook for Stocks

In a recent analysis, Warren Pies, founder and portfolio manager at 3Fourteen Research, raised concerns about the stock market and hinted at a potential selloff heading into December 2025. Notably, Pies had previously issued warnings to his clients about a likely 10% correction in the S&P 500 within the first half of the year. His apprehension was primarily rooted in weakening economic indicators and a Federal Reserve that appears reluctant to cut rates in light of new policies introduced by the Biden administration.

Pies’s predictions have proven accurate thus far; the S&P 500 has recorded a 9% drop in value this year and is down 13% from its peak in February. Observing these market shifts, he downgraded U.S. stocks from an overweight status to benchmark weight in February, citing overly optimistic investor sentiment and underestimations of impending economic challenges linked to tariffs.

Key Signals for Market Confirmation

Pies is closely monitoring two critical signals before shifting his investment strategy. He acknowledges that the S&P 500 is “getting close to the lows,” but insists that more confirmation is necessary before he moves back to an overweight stance and begins purchasing equities again.

First, he’s noted a substantial dip in retail investor sentiment. During the recent market decline, the volume of inverse ETFs—products that profit from falling markets—hit a cycle high. Specifically, these investments constituted 53% of total speculative ETF volume, surpassing the key 50% threshold he believes is necessary for a market bottom.

The second signal he is looking for involves a technical indicator known as breadth thrust, which refers to 90% of S&P 500 stocks being above their 10-day moving average. He also mentioned the potential for a retest of the market’s 52-week low of 4,982 set in April. Historically, 13 out of 18 bear markets since 1950 displayed a double bottom pattern, indicating that market lows are often reaffirmed before a genuine recovery takes place.

Investment Strategy Moving Forward

While generally optimistic about the market’s prospects over the next year, Pies currently maintains a preference for bonds and is underweight in commodities. He emphasized the importance of not further de-risking stock investments unless the economy deteriorates significantly. “We’ve been telling our clients to stay offensive, to keep an offensive mindset, and look for the bottom signal that we’ve laid out,” he stated, indicating that his team is prepared to increase equity exposure once the market stabilization indicators confirm a rebound.

Pies has a positive track record, having accurately forecasted a bullish outlook for gold since 2023, predicting a rise to $2,500 per ounce by early 2024, with a subsequent forecast of $3,000 per ounce. His prior experiences in the energy sector led him to predict drops in oil prices, which fell below $60 per barrel earlier this month, further showcasing his analytical acumen.

The State of the Economy

Pies also addressed the current state of the economy, noting that it is softening and cannot support high mortgage rates of around 7%. He anticipates that long-term rates, which have been rising more quickly than short-term rates, will soon reverse course and start to decline.

In his recent communications with clients, Pies provided insights on the critical role of foreign investment in U.S. stocks. He stated that foreign investors own approximately 20% of the U.S. equity market while U.S. households and pension funds are already fully invested. Despite these dynamics, he remains unconcerned about any significant unwinding of foreign flows into U.S. markets. “I think the U.S. is still the cleanest dirty shirt, and I don’t think there’s going to be an unwind of these structural flows,” he concluded.

Conclusion

As the stock market appears to be in a precarious position, strategists like Warren Pies provide invaluable insights for investors looking to navigate these uncertain waters. By focusing on key market signals and maintaining a watchful eye on economic indicators, Pies and his team at 3Fourteen Research encourage an offensive investment approach, preparing for a potential recovery as market conditions evolve. In a landscape filled with volatility, vigilance and strategic repositioning will be imperative for those invested in equities.