There is a clear dichotomy in the market. On one side, some investors remain cautious, while on the other, some are buying each dip out of fear of missing out (FOMO). This is a time when we need to take a lesson from one of the greatest investors of all time, Warren Buffett. At the Berkshire Hathaway annual shareholder meeting two weekends ago, Buffett, who announced he would step down as chief executive at the end of the year, offered some sound advice:
That said, Warren Buffett is now sitting on enough cash to buy any of the companies below the Top 24 in the S&P 500. In total, Berkshire’s cash position has soared to a record nearly US$348 billion in the first quarter, more than tripling over the last three years. He isn’t alone, as money market fund assets under management have hit a record US$7.4 trillion, reflecting about 15 per cent of the S&P 500’s market cap, up from 13 per cent in February. Over the past two years, total money market assets have risen by more than US$2 trillion.
Meanwhile, gold prices have continued to show strength, oil prices had fallen to 52-week lows (though gold dropped and oil rose after U.S.-China tariff reductions), and long-term bond yields have been rising. For example, the U.S. Treasury yield curve has steepened significantly, with the difference between the 10-year and the 2-year Treasury yields being positive for over six months now. Historically, once the yield curve turned sharply positive, the U.S. economy was in a recession. Additionally, downward earnings revisions for S&P 500 firms have spiked to levels not seen since the pandemic or the global financial crisis.
Despite these concerns, many retail investors are taking a completely different, more bullish approach. We at TriVest Wealth Counsel think there could be a return of FOMO driving this behaviour.
In April, retail investors purchased a record US$40 billion in U.S. exchange-traded funds and single stocks, more than double the monthly average seen in 2024, according to JPMorgan Chase & Co. data. The Vanguard S&P 500 ETF saw an inflow of almost US$21 billion last month, the largest in its history and the fifth largest for any ETF ever on a monthly basis. As investors make bets on short-term market fluctuations, zero days to expire options now account for roughly 60 per cent of total S&P 500 options volume, a new all-time high. As at last Tuesday, companies like Netflix have traded green for 11 consecutive days, marking Netflix’s longest winning streak in history.
The S&P 500 has now rebounded above its 50-day moving average last week and could break its 200-day to the upside soon. The S&P 500 markdown went from 20 per cent below its highs to about eight per cent under. Therefore, there doesn’t seem to be a lot of concern over equity markets compared with what commodity and bond markets are signaling.
So, who is correct?
Instead of trying to guess where the broader equity market is going to go in the near term, we think it’s better to ask yourself what Buffett, with his long-term outlook, would do.
Take energy, for example. Many are focused on the near-term risks from OPEC adding its held-back production to the market, driving oil prices lower. This paired with recession fears have motivated hedge funds that have sold energy stocks over the past six weeks at the fastest pace in a decade.
Underneath all of this is the bigger picture that this will likely accelerate a major looming problem south of the border. Diamondback CEO Travis Stice wrote that “geologic headwinds outweigh the tailwinds provided by improvements in technology and operational efficiency.” More so, “on an inflation-adjusted basis, there have only been two quarters since 2004 where front month oil prices have been as cheap as they are today … we are at a tipping point for U.S. oil production at current commodity prices.”
Despite Buffett’s Berkshire Hathaway amassing a large cash position, he has been buying in the energy sector. He bought Occidental Petroleum ’s stock when it was down 30 per cent from its highs in February 2025. “Buffett aggressively upped his stake by 763,017 shares on February 7, 2025, bringing its total holdings to 265 million shares, or 28.2 per cent of the company. At the time, this investment comprised 4.63 per cent of its total assets, making it the sixth-largest holding in Berkshire’s portfolio,” Jea Yu wrote in MarketBeat.
While we too own a bit of OXY, we think there will be an even better opportunity in Canadian oil companies with long-life reserves and low operating cost structures paired with very robust balance sheets that are also getting caught up in the current pessimistic environment, selling off to what we think are very attractive levels. It is important to say, though, that this doesn’t mean they can’t go even lower in the next few months.
In conclusion, the market presents a complex landscape with both risks and opportunities. While caution is warranted given the current economic indicators and market volatility, there are still promising investment avenues to explore. By staying informed, maintaining a balanced perspective, and being prepared to adapt, investors can navigate these uncertain times and potentially capitalize on the opportunities that arise.
Or as Buffett once wisely said “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.” At the same time don’t risk what you have and need for what you don’t have and could lose.
Martin Pelletier, CFA, is a senior portfolio manager at Wellington-Altus Private Counsel Inc., operating as TriVest Wealth Counsel, a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/oversight and advanced tax, estate and wealth planning. The opinions expressed are not necessarily those of Wellington-Altus.
_____________________________________________________________
If you like this story, sign up for the FP Investor Newsletter.
_____________________________________________________________
Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here .