Warren Buffett Issued Wall Street a $93 Billion Signal. History Suggests This Is What the Stock Market Will Do Next

Warren Buffett took control of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) in 1965, and since then, its Class A share price has skyrocketed by 5,500,000%. In comparison, the S&P 500 (SNPINDEX: ^GSPC) has gained 38,400% over the same period. Many investors, impressed by this outperformance, closely follow Buffett's investment moves, as reported in Berkshire's quarterly Forms 13F.

In the first half of 2024, Berkshire made $4.3 billion in stock purchases but sold $97.1 billion worth of stocks, resulting in record net stock sales of $93 billion by the end of June. This substantial sell-off suggests a potential shortage of attractive buying opportunities in the current market, hinting at the possibility of a market downturn.

Additionally, Berkshire's cash and U.S. Treasuries holdings reached an all-time high of $277 billion as of the June quarter. Buffett also repurchased only $345 million worth of Berkshire stock during that quarter, marking his lowest stock buyback allocation in six years.

These signs suggest an overvalued market, yet historically, the S&P 500 has delivered strong returns in the 12 months following years when Berkshire was a net seller.

In fact, Buffett's "warnings" have often been followed by significant gains in the S&P 500. Since 2010, Berkshire has been a net seller of stocks in seven years. While in some cases, this preceded subpar S&P 500 returns, more often, the opposite was true.