Warren Buffett’s warning to markets played out perfectly.
In 2024, Buffett’s Berkshire Hathaway was a net seller of $134 billion worth of stock – a clear warning of potential chaos for 2025.
Key Points About This Article
- Warren Buffett’s warning to markets played out perfectly, with markets plummeting.
- “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,” as we noted in March.
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In fact, as I noted on March 13, “In years where Berkshire has been a net seller, we’ve seen below-average years follow. With the firm a net seller of $134 billion in 2024, we can assume 2025 could be below average, too.”
“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 2025 (ours is in the shop for repair), Buffett’s actions and their history tell us 2025 could be below average.”
Also, while Berkshire was reducing exposure to equities, he amassed about $334 billion in cash and was hold about $234 billion in Treasuries.
Now, thanks to a wild trade war, we’re seeing below average returns, as predicted.
It May be Time to Buy the Excessive Fear
With substantial amounts of chaos priced in the markets, it may be time to buy the fear.
For one, markets are resilient. They’ve bounced back from far worse situations. Two, remember Buffett tells us to be greedy when others are fearful, and fearful when others are greedy. Baron Rothschild tells us to buy when there’s blood in the streets. Sir John Templeton tells us to buy on excessive pessimism when others run scared.
That time may be now – especially before market conditions and investor sentiment improve.
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