Warren Pies, 3Fourteen Research co-founder, joins 'Closing Bell' to discuss what catches Pies eyes the most, concerns around trade policy and much more.

Warren Pies, co-founder of 3Fourteen Research, commented on the recent decline in the NASDAQ and broader markets, noting that the drop follows an extended period without significant pullbacks. He described the correction as necessary and healthy, given the strong market performance and heightened investor sentiment in recent months.

Pies identified renewed concerns over US-China trade relations, particularly the possibility of additional tariffs, as a key catalyst for the current market volatility. He recommended maintaining full equity positions while overweighting bonds, especially those with longer durations, as a defensive strategy in the face of potential economic slowdowns linked to trade tensions.

Markets seeing needed correction, says 3Fourteen's Warren Pies

Warren Pies is 314 Research's co-founder. He joins us now. I'm looking at 3.3% down on the NASDAQ. Is that what catches your eye the most? Yeah, thanks for having me. It does. I mean, that's where the leadership's been, so it's not surprising to see that's what's giving the most back. It's a little bit of a stressful day, I guess, but when I zoom out and look at the market and where we've come from, we've gone now 119 trading days in a row without a 3% pullback on the S&P 500. And that's the seventh longest streak without that kind of a pullback historically, going all the way back to the 1950s. And when you look at those streaks, we've returned like 28% before today. And that's the strongest performance we've seen within any of those streaks. So when I think about it, this is just, I think, a needed correction and a needed pullback, something we've been waiting for. Sentiment's been extreme, talks of bubbles, talks of doubling between now and March of next year, and analogs to 1999. This is healthy. We're in this window where you'd expect it in October, and that's how we're approaching it as of now, is a healthy pullback. But, I mean, sometimes you look at these things, and it sounds like this is what you're suggesting, is we were overbought, we were due for a pullback, and now we're getting it. And sometimes you can't point to an actual catalyst that would send you into that sort of atmosphere in the market, whereas the difference today is we have a serious catalyst, and it's a renewal of tensions between the United States and China. We're talking about the possibility of more tariffs, not less. The market had sort of been anesthetized to the whole issue because we haven't really talked about it all that much, and it figured this too shall pass, and we'll get on to talking about rate cuts and positive earnings. But now we have a serious concern to think about, depending on what the president does and if he does it. Yeah, I mean, it's a concern. I've been a little bit in recent weeks talking to clients and saying, you know, we were so concerned about tariffs, and tariffs are a real drag. And we didn't have a full taco from the first round of tariffs, really. And so we've expected somewhat of a fiscal drag. Our recommendation for clients is to keep a full equity position and then have an overweight bond position and, in fact, skew towards a little bit of duration. And you can see it on a day like this because I think that if we're going to have another flare-up in these tariff negotiations or some kind of trade war, I think that bonds will end up being the place that you want to be because it's going to manifest itself as a growth scare. So that's been the way we're playing. And, I mean, I think we've gone through this, and ultimately we've already tested the limits of what Trump can tolerate. And I don't think Trump – I think the taco trade is still with us. Yes, there could be a little bit of danger in saying that. But if we get a little bit more weakness in this October period, I think you'll see a capitulation on his part. And ultimately this will – we'll get back to where we were a few weeks ago, and it's just going to be a nice sentiment reset. That's how I'm interpreting it.

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