Market Drop? Warren Buffett: "I Told You So"

It seems like Warren Buffett can now say, I told you so.

At the end of last year, while the S&P 500 was hitting record highs over 50 times, Buffett—the CEO of Berkshire Hathaway—was busy selling stocks. Many market observers were puzzled by his moves.

Now, the picture is much clearer.

Berkshire's Strategic Selling Was Well-Timed

The stock market's downturn in 2025 has validated Berkshire Hathaway's decisions in Q4 2024.

According to Berkshire's latest 13-F filing, Buffett was not aligned with the market's optimism at the end of 2024. During the last three months of the year, Berkshire sold approximately $5 billion worth of bank of america shares and $3 billion worth of citigroup shares. Additionally, it reduced its stakes in Brazilian fintech company nu holdings, cable operator Charter Communications, and Liberty Formula One, the parent company of Sirius XM.

Although Buffett did not adjust his largest holding—Apple, his only notable purchase during the quarter was Constellation Brands, a spirits manufacturer. Overall, Berkshire was a net seller in 2024, leaving the company with more cash on hand than any other U.S. corporation.

Following the 13-F report in mid-February, Barron's noted:Buffett has often moved against the market, such as during the dot-com bubble in the late 1990s. He was proven right then, and he may be proven right again this time.

That prediction proved accurate much sooner than expected.

Since the 13-F filing was released on February 14, the S&P 500 has dropped about 5%, effectively erasing all post-election gains from Q4 2024—and more. As of Tuesday's close, the index had fallen to its lowest level since November 4, 2024.

Looking back, Buffett's decision to sell while the market was hitting record highs now seems justified.

Trade War Tensions: A Key Concern for Buffett

While some fund managers have criticized Buffett for being too conservative in recent years, signs of market turbulence were already evident in Q4 2024.

One major factor? Trump's tariff threats.

Throughout his campaign, Trump made it clear that he planned to impose steep tariffs if re-elected. Many market watchers dismissed this as mere rhetoric, but it turns out—he meant it.

Now, with Trump following through on his tariff plans, investors are worried. History offers a warning: Trump's 2018 tariffs disrupted global trade and contributed to market declines.

Buffett likely saw the risks early. Just last weekend, he referred to tariffs as acts of war and warned that they could exacerbate U.S. inflation.

Markets dislike uncertainty—and Trump's presidency has been synonymous with policy volatility and unpredictable headlines. If his first term is any guide, investors should brace for more of the same.

However, Buffett's caution wasn't just about politics.

By late 2024, inflation remained stubbornly above the Federal Reserve's 2% target, which forced the market to scale back its expectations for rate cuts. Inflation pressures consumer spending—the primary driver of the U.S. economy—and any signs of tighter monetary policy spook investors. The market sell-off in Q3 2024 had already demonstrated how quickly sentiment could reverse.

Valuations: Buffett's Primary Concern

For Buffett, valuation was likely the biggest red flag.

As the market hit new highs in Q4 2024, stocks became increasingly expensive, both relative to historical levels and compared to global peers. The market was essentially pricing in a perfect scenario—a setup that value investors like Buffett typically avoid.

Insider selling trends also supported Buffett's skepticism. Corporate executives were aggressively selling stocks in Q4 2024, cashing in on high valuations.

Should Investors Worry?

This market correction does not necessarily signal a crisis.

Despite his large cash holdings, Buffett has not abandoned the stock market.

In his latest shareholder letter, he addressed concerns about Berkshire's growing cash position:Some commentators consider our current cash holdings unusually high, but your capital remains primarily invested in equities. That preference will not change.

If this market correction proves anything, it's that Buffett's title as the Oracle of Omaha remains well-earned.

Many market strategists still believe the S&P 500 could reach 6,000 by year-end, though the path may be more volatile than previously expected. Additionally, Trump's policies could shift quickly, as he has historically kept a close eye on the stock market's performance.