When Warren Buffett’s Berkshire Hathaway warns of trouble ahead, pay close attention.
Many times, the firm’s investments and cash positions serve a key barometer of the overall market. For example, at the end of 2024, Berkshire sat on $318 billion in cash and cash equivalents – which was about double the amount it held a year earlier.
In addition, as Warren Buffett recently told shareholders, “Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned.”
Even more telling, Buffett struggled to find good stock investments last year. Instead, he stashed away more cash, which was a clear warning he was fearful.
In addition, as reported Yahoo Finance, “When the stock market becomes pricey, Warren Buffett has no qualms about paring down his investment portfolio and sitting on his proverbial hands until valuations become attractive.”
Historically, here’s how the S&P 500 performed the year after Buffett stashed cash
In 2023, the S&P 500 jumped 23%. In 2021, the S&P 500 fell 19%. In 2020, the index jumped 27%. In 2016, the index jumped 19%. In 2014, the S&P 500 fell 1%. In 2012, it was up 30%. And in 2010, the S&P was flat on the year. That gives us an average of 11% since 2010 again following a year where Buffett was a net seller. If we look at the cumulative returns of the S&P 500 since 2010, there’s an average annual return of 13%.
In short, in years where Berkshire Hathaway has been a net seller, we’ve seen below-average years follow. With the firm a net seller of $134 billion worth of investments in 2024, we can assume 2025 could be below average, too.
So far, as we’ve seen in 2025, markets have been struggling, most recently with tariffs.
Also, consider this.
The S&P 500 returned a total return of 141% in years when Berkshire was a net buyer in the preceding year. The index returned about 93% when Berkshire was a net seller in the preceding year. And while we’d need a crystal ball to tell you what could happen in the rest 2025 (ours is in the shop for repair), Buffett’s actions and their history tell us 2025 could be below average.
It’s just something to keep in mind if you’re hunting for an opportunity in this crazed market — especially with tariffs, an intensifying trade war, fears of inflation, and growing concerns about a potential recession with tariffs.
The image featured at the top of this post is ©Alex Wong / Getty Images News via Getty Images.