Warren Buffett usually sees the proverbial glass of water as half full rather than half empty. He's optimistic by nature. Even during the bleak days of the financial crisis in late 2008, the legendary investor remained upbeat.
But there's a good case to be made that Buffett is more pessimistic about the near term than he has been in a while. I can think of 12 reasons why he appears to be bearish about the stock market right now.
Image source: The Motley Fool.
A bearish dozen
Here are those 12 reasons Buffett looks like a bear these days, listed in alphabetical order:
- Activision Blizzard
- Ally Financial
- Amazon
- Aon
- Bank of New York Mellon
- Celanese
- Chevron
- General Motors
- McKesson
- RH
- Taiwan Semiconductor Manufacturing
- U.S. Bancorp
Those are all the stocks in Berkshire Hathaway's (BRK.A 0.36%) (BRK.B 0.21%) portfolio that Buffett sold in the first quarter of 2023. He completely closed Berkshire's positions in four of them -- Bank of New York Mellon, RH, Taiwan Semiconductor, and U.S. Bancorp.
It's not all that surprising that Buffett cashed out of the two bank stocks. They've fallen out of his favor (for the most part) over the last few years.
Sure, Buffett (or one of his two investment managers) did buy a few stocks. Berkshire initiated three new positions. It loaded up even more on Occidental Petroleum, and added incrementally to a few other holdings. However, Berkshire sold a lot more heavily than it bought in Q1, with a net difference of around $10.4 billion.
Importantly, the giant conglomerate trimmed its positions in multiple sectors in addition to banking, including healthcare, industrials, and technology. All of this makes Buffett look like a bear much more than it makes him look like a bull.
Over 127 billion other reasons
We actually could find over 127 billion other reasons why Buffett seems to be bearish right now. Berkshire Hathaway's cash position, including cash, cash equivalents, and short-term investments in U.S. Treasury bills, totaled $127.7 billion at the end of the first quarter.
That isn't the highest amount of cash Buffett has kept on the sidelines. But it's getting pretty close to his all-time peak level. And it's a jaw-dropping number that reflects that the legendary investor simply isn't motivated to put Berkshire's cash to work in stocks at the moment.
The definition of a stock market bear is someone who thinks that stocks are more likely to go down in the near term than they are to go up. The fact that Buffett is keeping so much of Berkshire's powder dry indicates that he meets that definition.
Actions speak louder than words
In his latest letter to Berkshire Hathaway shareholders, Buffett wrote: "Charlie [longtime business partner Charlie Munger] and I plead ignorance and firmly believe that near-term economic and market forecasts are worse than useless." He would probably never utter the words that he thinks the stock market will fall.
However, as is usually the case, actions speak louder than words. Buffett was a net seller of stocks in the first quarter. He has allowed Berkshire to amass an unusually huge cash stockpile. He might not be saying out loud that the stock market could decline, but what he's doing hints that he thinks it could.
But even if Buffett is indeed pessimistic about the direction of the overall market, he's still finding at least a few stocks to buy. Perhaps the biggest lesson he can offer to other investors today is that it's always a good time to buy stocks -- if you pick the right ones.
