Finance

Warren Buffett’s $382 Billion Bet: Is Berkshire Hathaway Bracing for a Market Downturn?

Warren Buffett‘s Berkshire Hathaway hoarded a record $382B cash, selling stocks amid high S&P 500 valuations.

November 4, 2025, 9:34 AM

Close-up portrait of billionaire investor Warren Buffett, wearing glasses and resting his chin on his hand.

A close-up of Warren Buffett, the renowned billionaire investor and CEO of Berkshire Hathaway. By Photo Agency / Shutterstock.com.

Executive Summary

Berkshire Hathaway has accumulated a record $382 billion in cash and U.S. Treasury bills, marking 12 consecutive quarters of being a net seller of stocks.

The S&P 500’s cyclically adjusted price-to-earnings (CAPE) ratio reached 39.5 in October, a valuation level only previously exceeded during the dot-com bubble and placing it in the 97th percentile historically.

Historically, periods when the S&P 500’s monthly CAPE ratio exceeded 39 have been followed by significant declines, with average returns of -4% over one year, -20% over two years, and -30% over three years.

The Story So Far

Berkshire Hathaway, led by Warren Buffett, has been a net seller of stocks for 12 consecutive quarters, accumulating a record $382 billion in cash, a strategy attributed to its increased size limiting investment opportunities and Buffett’s concerns regarding current stock market valuations. This cautious approach is underscored by the S&P 500’s cyclically adjusted price-to-earnings (CAPE) ratio reaching 39.5 in October, a valuation level that has historically preceded significant market declines.

Why This Matters

Warren Buffett’s Berkshire Hathaway has accumulated a record $382 billion in cash and consistently sold stocks for 12 quarters, signaling a cautious investment posture amidst current market conditions. This defensive strategy aligns with concerns over the S&P 500’s cyclically adjusted price-to-earnings (CAPE) ratio, which at 39.5, is at a historically elevated level previously seen only during the dot-com bubble. Historically, such high valuations have preceded significant market declines, suggesting potential challenges and a need for caution in the broader market in the coming years.

Who Thinks What?

Berkshire Hathaway, led by Warren Buffett, is taking a cautious approach to the stock market, consistently selling more stocks than it buys and accumulating a record cash reserve due to concerns about current market valuations and the company’s large size.

Historical market data, particularly the S&P 500’s cyclically adjusted price-to-earnings (CAPE) ratio, suggests that the current high valuation has historically preceded significant market declines over one, two, and three-year periods, indicating potential challenges for the broader market.

Berkshire Hathaway, led by CEO Warren Buffett, continued its trend of being a net seller of stocks in the third quarter, accumulating a record $382 billion in cash and U.S. Treasury bills. This sustained disposition, marking 12 consecutive quarters of net sales, comes as the S&P 500’s cyclically adjusted price-to-earnings (CAPE) ratio reached 39.5 in October, a valuation level that has historically preceded market losses.

Berkshire’s Cash Position and Investment Strategy

The latest financial report revealed Berkshire Hathaway sold more stock than it purchased in the third quarter, pushing its cash and short-term investments to $382 billion. This substantial cash reserve, which exceeds the market capitalization of all but two dozen S&P 500 companies, indicates a deliberate choice by Buffett to keep capital out of the equity market.

Analysts suggest two primary factors for Buffett’s shift from his historical role as a net buyer of stocks. One reason cited is Berkshire’s increased size, which limits the number of potential investments capable of significantly impacting its financial performance. Another attributed factor is Buffett’s apparent concern regarding current stock market valuations, a sentiment reflected in the company’s consistent net selling over the past three years, totaling $184 billion.

S&P 500 Valuation Concerns

The S&P 500’s CAPE ratio of 39.5 in October represents its highest level in a quarter century. This valuation has been reached only once before in the index’s history, during the dot-com bubble in 1999.

This historical context places the current market valuation in the 97th percentile of its seven-decade history, indicating a rare period of high expense. The S&P 500 has only been this expensive approximately 3% of the time during its existence.

Historical Precedent for Declines

Historically, periods when the S&P 500’s monthly CAPE ratio exceeded 39 have been followed by significant declines. Data from Robert Shiller indicates average returns of -4% over one year, -20% over two years, and -30% over three years in such circumstances.

While past performance does not guarantee future results, this historical pattern suggests potential challenges for the broader market. The current market environment, according to analysis, warrants a cautious approach.

Market Outlook

Berkshire Hathaway’s continued net selling of stocks and record cash reserves, alongside the S&P 500’s elevated CAPE ratio, highlight a cautious approach by Warren Buffett amid high market valuations. The historical data associated with such high CAPE levels suggests potential challenges for the broader market in the coming years.