Do Warren Buffett’s Latest Investment Moves Signal Recession ‘Right Around the Corner’ — Experts Weigh In
Written by
Yaël Bizouati-Kennedy
Edited by
Nicholas Morine
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Berkshire Hathaway’s chairman, Warren Buffett, is one of the world’s most notable investors. His money moves have always been scrutinized in search of clues as to where he thinks the economy is going.
The “Oracle of Omaha” sold $28.7 billion of stock in the first three quarters of 2023 — a move some see as a predictor that the economy could be headed for trouble.
As Newsweek reported, according to the company’s earnings, Buffett’s Berkshire Hathaway sold a net $10.4 billion of stock in the first quarter of the year, sold close to $13 billion of shares and bought less than $5 billion in the second quarter — and in the third quarter, it sold $5.3 billion worth of stocks.
Stocks Could Be Seen as Pricey Currently
Steve H. Hanke, a professor of applied economics at Johns Hopkins University, told Newsweek that Buffett’s and Berkshire Hathaway’s “recent lightening up on stocks and accumulation of a pile of cash — $157 billion — is consistent with the fact that stocks are relatively pricey right now.”
He also added that this could be a sign “that a recession is right around the corner.”
But not all experts agree with this premise.
“My sense is the selling likely reflected some profit-taking and rebalancing in the aftermath of a decent run-up in the market this year,” said Cathy Seifert, vice president, CFRA Research. “While I think there is a chance of a correction — I don’t necessarily think a recession is imminent.”
Essential To Put Buffett’s Moves in Context
Kraig Kleeman, founder and CEO of The New Workforce, said that while Hanke’s perspective is compelling, it’s essential to contextualize Buffett’s actions within his broader investment philosophy.
“Known for his long-term, value-oriented approach, Buffett’s sell-off may be less a prophecy of recession and more a reflection of his assessment of overvalued stocks,” said Kleeman.
Berkshire’s amassed cash reserve doesn’t necessarily spell out fear, he said, as it could be strategic positioning for acquiring undervalued assets when the market dips. This would align with Buffett’s penchant for investing in undervalued entities during economic lows.
According to him, Buffett’s latest investment decisions might suggest prudence in an unpredictable economic environment, but do not definitively point to an impending recession.
“These moves are about opportunistic positioning for future investments as they are about cautious navigation in volatile times. As with any investment strategy, multiple interpretations exist, and Buffett’s actions’ true intent and consequences will unfold in time,” he added.
More Recent Buffett Moves and What They Mean
David Kass, clinical professor of finance at University of Maryland’s Robert H. Smith School of Business, noted that Buffett’s recent net sales of equities in Berkshire’s portfolio through Sept. 30 is indicative of his view that the stock market was fully valued, offering relatively few equity investments that were attractive at current prices and interest rates.
However, Kass added that on Dec. 13, Berkshire filed a Securities and Exchange Commission (SEC) form which revealed its purchase of an additional $590 million of shares in Occidental Petroleum a few days earlier, resulting in Berkshire increasing its stake in Occidental to more than 27%.
“Buffett’s previous cautious investment behavior in 2023 related to stock market valuation, and not a forecast of a recession,” he said. “Buffett historically has not altered his investment strategy based on macroeconomic forecasts. He is a long-term investor who holds on to his portfolio throughout economic cycles and adds to his equity investments over time.”
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