Warren Buffett, known for his smart investments, is causing a stir by not buying stocks and instead hoarding a massive $189 billion in cash, leading many to worry he’s bracing for a market disaster. Buffett’s recent move of selling off a huge chunk of Apple stock—once a cornerstone of his portfolio—has experts on edge, hinting that a major market crash could be on the horizon. His silence and massive cash reserve have sparked speculation that he’s expecting a dramatic 40% drop in the stock market, making everyone wonder if he knows something big that we don’t.

Warren Buffett, one of the world’s most famous investors, is facing a massive financial storm that has been building up in the stock market for 15 years. This storm could lead to a huge drop in stock prices—up to 40%—at any moment. Buffett, known for his careful investment decisions, is currently making headlines not for what he’s buying, but for what he’s not buying.

Buffett has been unusually quiet about buying new stocks lately. Instead, he’s been selling off shares of Apple, a company he used to hold onto as a long-term investment. This has led him to accumulate an enormous pile of cash—$189 billion at Berkshire Hathaway, his investment company. Many experts think Buffett is saving up this cash because he expects a big market crash soon.

To understand why this matters, consider this: the amount of cash Buffett’s company has saved over time is shown in gray on a chart, while the orange line represents the price of the S&P 500, which tracks the performance of 500 major US companies. When the market is doing well, the S&P 500 line goes up. When it’s not, it goes down. Buffett’s cash reserves have often grown when the market was shaky, suggesting he might be preparing for tough times ahead.

Buffett has said that predicting market movements is impossible, but his recent actions suggest he’s doing just that. It seems he’s holding onto his cash, waiting for a better time to invest, even though he publicly claims it’s hard to time the market.

At a recent meeting with Berkshire Hathaway shareholders, Buffett was asked about his strategy of selling stocks and gathering cash. His answer has left many wondering what might happen next in the stock market and how they should adjust their own investment plans.

As we face these uncertain times, keeping an eye on Buffett’s actions might give us clues about what could come next in the stock market. Staying informed and ready for changes can help us navigate through these potential stormy financial conditions.

Global Stock Market Crash

On Monday, the stock market took a big dive as investors panicked over the possibility of a recession in the US. This fear led to a wave of selling, and the market data shows a dramatic downturn.

The trouble started last Friday when a report revealed that the unemployment rate in the US had unexpectedly risen. This news set off alarm bells because it suggested the economy might not be as strong as hoped. As a result, many investors began betting that the Federal Reserve would lower interest rates by a significant amount—half a percentage point—in its September meeting. This speculation also fueled discussions among economists about how healthy the US economy really is, given its major impact on the global financial system.

On Friday, US stocks ended the day sharply lower, with the Nasdaq Composite—a major index focused on technology companies—falling into what’s known as a correction (a drop of 10% or more from recent highs). When trading started again on Monday, the downward trend continued, adding to the market’s worries.

Timeline

August 5, 2024

14:45 GMT

J.D. Vance, who’s running alongside Donald Trump in this year’s presidential race, has criticized Vice President Kamala Harris for not being capable of handling the current stock market crisis. Vance warned that the situation could lead to a global economic disaster and claimed that Trump’s past leadership was steady and reliable, unlike Harris, who he believes is too scared to answer tough questions from the media.

14:32 GMT

US banks are taking a hit today. JP Morgan’s stock dropped by 2.4%, Morgan Stanley fell by 3.6%, and Bank of America is down 3.4%. Wells Fargo’s shares are down by 4.3%, Citigroup has dropped 5.4%, and Goldman Sachs is down 3.5%.

14:31 GMT

Jamie Cox from Harris Financial Group noted that sudden swings in currency markets are usually quick but short-lived. He mentioned that the market is jittery because different central banks are taking different actions, and with the possibility of more conflict in the Middle East and a chaotic presidential election, things are looking negative. However, he suggested that investors might find good deals in this downturn.

14:02 GMT

Tech stocks in the US are all down today. Microsoft and Alphabet fell by about 3%, Meta dropped by 4%, and Apple, Amazon, and Tesla are all around 5% lower. Nvidia’s stock has plunged by about 8%.

13:43 GMT

A Bloomberg index tracking the seven largest tech companies in the US—known as the Magnificent 7 (Apple, Meta, Amazon, Alphabet, Tesla, Microsoft, and Nvidia)—has fallen 9% so far today. This is the worst drop for this index since 2015.

13:40 GMT

US markets started the day lower: the S&P 500 is down 4.16%, the Nasdaq 100 fell 5.4%, and the Dow Jones is down 2.68%.

13:36 GMT

Chicago Federal Reserve President Austan Goolsbee dismissed worries about a possible US recession. He acknowledged that job numbers are weaker than expected but said it doesn’t yet look like a recession. Goolsbee assured that the Federal Reserve would act to address any signs of economic trouble.

13:06 GMT

Daniel Tan from Grasshopper Asset Management in Singapore expects the US Federal Reserve to cut interest rates twice by the end of the year. He thinks this will help emerging market bonds do well but warned that the stock sell-off might continue because investors are selling off assets to cover losses after a strong rally in tech stocks earlier this year.

13:06 GMT

Just before US markets opened, futures for the Nasdaq 100 were down nearly 6%, and S&P 500 futures were 4.6% lower.

12:32 GMT

European stock markets, which had calmed down somewhat earlier, started to fall again in the afternoon. The UK’s FTSE 100 is down 2.9%, and Europe’s Stoxx 600 dropped by 3.3%.

12:11 GMT

Mohit Kumar from Jefferies investment firm said that recent market moves have been driven by positioning, with too many investors holding onto tech stocks. He believes the current correction is just a clean-up of positions and not the start of a larger downturn.

12:11 GMT

US Treasury yields fell on Monday. The yield on the benchmark ten-year note dropped to 3.745%, its lowest since July 2023, and the two-year Treasury yield fell more than 11 basis points to 3.754%.

11:47 GMT

Some investors see the drop in US tech stocks as an opportunity to buy. Lamar Villere from Villere & Co mentioned that they’ve been waiting for a chance to invest in high-priced tech stocks, and now they see it.

11:38 GMT

Tom Lee from Fundstrat told CNBC he doesn’t expect a market crash but thinks that once the current volatility calms down, stocks will start climbing again. He suggested that the market’s reaction might be more about temporary fears than actual problems, given that interest rates are falling and consumers are in good shape.

11:30 GMT

The US dollar has fallen about 0.5% against major currencies and is trading close to its lowest point in five months.

11:29 GMT

The Japanese yen reached its highest level against the US dollar since January. Investors are turning to safe-haven assets like the yen amid the market turmoil, which surged by 3.4% to 141.675 per dollar before easing a bit.

11:20 GMT

South African stocks and the rand are down as investors shy away from risky assets. The rand fell about 2% to 18.6 against the US dollar, its lowest in nearly two months, and the Top-40 stock index dropped by about 2.2%.

10:55 GMT

The Swiss franc surged to its highest level against the euro in nearly ten years as investors sought safety amid the stock market chaos. The franc rose to €1.0856, up 3.5%, the highest since January 2015.

10:31 GMT

The CBOE VIX Index, known as Wall Street’s ‘fear gauge’ for measuring stock market volatility, soared 115% to 50 points, its highest level in over four years. Pierre Veyret from ActivTrades described this jump as driven by fear, with investors seeking safety and reducing their risk exposure.