Warren Buffett's quiet moves send shockwaves through Wall Street: 'Canary in the coal mine'

Daily Mail​

20-07-2025

Famed investor Warren Buffett has quietly executed a series of multi-billion-dollar exits from major US banks.
It appears to be a strategic shift that analysts say signals a sharp turn in sentiment from the world's most closely watched investor - and a growing belief that America's booming financial sector is headed for turbulence.
During the first half of 2025, Buffett's Berkshire Hathaway sold more than $3.2 billion in shares tied to the banking industry, including a $1 billion exit from Citigroup, a $2 billion reduction in Bank of America, while also trimming holdings in Capital One.
The moves were disclosed through SEC filings and confirmed by analysts monitoring Berkshire's quarterly portfolio updates.
'Berkshire has clearly been reducing its exposure to U.S. bank stocks,' said Larry Cunningham, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware to The Telegraph. 'That activity signals a cautious or even bearish outlook on banking.'
The divestments come at a moment of strong profitability in the sector.
Goldman Sachs this week reported a 22% jump in quarterly earnings, while Citigroup profits surged 25%, both beating Wall Street expectations. The KBW Nasdaq Bank Index is nearing record highs.
Yet despite these short-term gains, Buffett is building a historically large cash position - now exceeding $350 billion - and repositioning Berkshire's portfolio toward energy and consumer staples, including fresh investments in Occidental Petroleum and Constellation Brands.
Buffet famously warned about derivatives as 'financial weapons of mass destruction' years before the 2008 collapse. He quietly accumulated cash before the COVID crash in 2020.
Markets may be known for their irrational behavior but Buffett's moves are usually based on numbers, patterns, and a gut instinct honed over seven decades. His legacy is built not just on the billions he made, but the crashes he avoided.
His cooling on banks is the classic contrarian signal the Oracle of Omaha is famous for.
The rapid repositioning has not gone unnoticed by investors already rattled by political volatility, surging inflation, and uncertainty surrounding US monetary policy.
'Part of this could be driven by expectations that these current equity valuations are not sustainable,' said Gennadiy Goldberg, head of US rates strategy at TD Securities.
Buffett's moves align with a broader pullback among major industry leaders.
Jamie Dimon, CEO of JPMorgan Chase, sold $31.5 million in company stock in April, following a $125 million sale in 2024. It was his first personal sell-off since becoming CEO in 2005.
Such exits come as Wall Street deals with rising inflation and uncertainty over Trump's economic policy.
The Trump administration's revived trade wars have injected volatility into the markets and uncertainty into long-term growth projections.
US inflation hit 2.7% in June, and the Federal Reserve has twice slashed its 2025 GDP forecast, from 2.1% to 1.4%.
The central bank's projections signal weakening consumer demand and a potential slowdown in growth during the second half of the year.
Higher inflation could force long-term Treasury yields up - triggering a domino effect of rising loan defaults, declining merger activity, and stress on bond portfolios.
'The big, big red flag is going to be consumption,' said Kambiz Kazemi, chief investment officer at Validus Risk Management. 'If unemployment goes up and consumer spending drops, it triggers a feedback loop through the entire borrowing ecosystem.'
Concerns are also rising over the Trump administration's confrontational stance toward the Federal Reserve.
Meanwhile, Trump's escalating threats to remove Federal Reserve Chairman Jerome Powell have rattled investors and bank CEOs alike.
JPMorgan's Dimon, Goldman Sachs' David Solomon, Citigroup's Jane Fraser, and Bank of America's Brian Moynihan have all warned the White House against destabilizing monetary policy.
'Uncertainty around tariffs, and more generally, uncertainty about most subjects — the way the administration is running things - is going to be slowly eroding the trust in the system,' Kazemi added. 'The reality has to catch up.'
A shake-up at the Fed could lead to artificially lowered short-term interest rates, further distorting inflation expectations.
While trading revenues have remained strong amid tariff-driven market volatility, other banking segments, particularly corporate lending and dealmaking are already showing signs of strain.
The bond market has begun to reflect broader investor skepticism.
Bill Gross, co-founder of Pimco and widely regarded as the 'Bond King,' issued a warning on X earlier this week: 'Investors wake up! I for one am moving defensively - more cash, buying value with 4-5% dividend yields. And an emphasis on non-US.'
Gross's comments underscore growing unease in global markets, with inflation, rate uncertainty, and trade policy reshaping the investment landscape faster than Wall Street earnings can keep up.
Although Berkshire Hathaway maintains significant exposure to the financial sector - 16.4% in American Express and 10.1% in Bank of America, its trajectory seems clear.
The firm is reallocating toward sectors traditionally seen as more resilient in downturns.
'It's always hard to know how much of Berkshire's selling reflects macroeconomic pessimism versus firm-specific or internal considerations,' Cunningham said. 'But the concentration in energy and staples suggests a shift toward stability and defensiveness.'