Many investors might be experiencing stock market acrophobia these days. Acrophobia is the fear of heights. Stock market acrophobia is the fear that stock prices are reaching worrisome heights. This feeling is unsurprising considering the S&P 500 is now in the third year of a strong bull market and has delivered gains of 23% or more in two consecutive years.
Rich Dad Poor Dad author Robert Kiyosaki predicts the biggest stock market meltdown in history will happen soon. New York University professor emeritus Nouriel Roubini, who warned of a major housing correction and recession in 2006, expects resurging inflation and slower economic growth. This combination, known as stagflation, could set the stage for a significant stock market decline.
But at least one famous investor isn't in the doomsday camp -- Warren Buffett. Here's why Buffett isn't predicting a stock market crash in 2025.
Don't get the wrong idea: Just because Buffett isn't predicting a stock market crash this year doesn't mean he's bullish about stocks. Pretty much everything he's been doing indicates that he's instead relatively bearish.
Buffett has been a net seller of stocks for eight consecutive quarters. Berkshire Hathaway should disclose its portfolio transactions for the fourth quarter of 2024 within the next day or two. I expect Berkshire's regulatory filing will reveal that Buffett's net selling streak extended to nine consecutive quarters.
Another sign of Buffett's less-than-rosy outlook is Berkshire's cash stockpile. As of Sept. 30, 2024, the conglomerate had cash, cash equivalents, and short-term investments in U.S. Treasury bills totaling over $325 billion. That's the biggest cash position by far in Berkshire Hathaway's history.
We also shouldn't overlook the valuation metric bearing Buffett's name. The Buffett indicator measures the ratio of the total U.S. stock market capitalization to GDP. In 2001, Buffett wrote, "If the ratio approaches 200% -- as it did in 1999 and a part of 2000 -- you are playing with fire." This metric is now above 200% -- its highest level ever.
With all of the evidence that Buffett is decidedly bearish about the stock market, why isn't he predicting a crash in 2025? There's one simple explanation: The legendary investor avoids making stock market predictions at all.
In his 1992 letter to Berkshire Hathaway shareholders, Buffett wrote: