Warren Buffett sounds the alarm: His $134 billion move signals what’s coming for Wall Street; history says this could happen in 2025

Billionaire investor and CEO of Berkshire Hathaway Warren Buffett, sounded the alarm for Wall Street as his company sold a record $134 billion of net stock last year, a move that's raised concerns for investors and analysts, as per a report. Historically, when Buffett’s firm becomes a net seller, it’s often followed by below-average market performance, and many experts believe this could be a sign of what’s to come for the stock market in 2025, as per The Motley Fool.

Net selling trend

Since 2010, Berkshire Hathaway has been a net seller of stocks in eight years, including last year, as per the report. While the S&P 500, the most widely followed measure of the US stock market, has seen an average return of 11% during the year following a "net-seller" year, it’s typically lower than the average annual return of 13% over the same period, reported The Motley Fool.

Berkshire’s decision to trim its stock portfolio in 2024 is particularly striking because of the size of the sell-off, as per The Motley Fool. Buffett and his team still have $272 billion invested in around 40 stocks, but the sheer amount of selling suggests they couldn’t find enough attractive opportunities, as per the report. Buffett’s reluctance to buy in a hot market is raising alarms about the market’s future in 2025, according to The Motley Fool.

Call for caution

Despite Berkshire’s strong balance sheet and ongoing investments, this warning isn’t about avoiding the market entirely, according to The Motley Fool. After all, Berkshire has made purchases every year since 2010. But it does suggest caution, as per the report. The $134 billion in stock sales and substantial cash reserves on the company’s books hint that we might be in for a more subdued market in 2025, reported The Motley Fool.

What history tells us about net-seller years

Looking at history, whenever Berkshire has been a net seller, the market’s performance has typically been more muted, as per the report. In years when Berkshire was a net buyer, the S&P 500 saw a cumulative return of 141%. But during net-seller years, that return dropped to just 93%. While the market as a whole has delivered an impressive 425% return over the past 14 years, avoiding the stock market in "net-seller" years could have been a costly mistake, according to The Motley Fool.

According to The Motley Fool, investors should be prepared for a potentially slower 2025 and remain cautious as they navigate the market in the months to come.

FAQs

What is a net seller of stocks?
Net seller is when a company sells more stocks than one buys in a year. This pattern has, in the past, been accompanied by below-average market returns.

Is this an indication to not invest?
Not exactly. Although the sell-off is alarming, Berkshire has still been buying every year since 2010. The takeaway is not to avoid the market but to be cautious, according to the report.