Warren Buffett Absolutely Nailed the Trump-Induced Market Sell-Off. But When Will the Oracle of Omaha Turn Bullish?

By now, it's no secret that Warren Buffett and his company Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) absolutely nailed the stock market sell-off caused by President Donald Trump's tariffs and global trade tensions. While the market raged in 2024, Buffett and Berkshire stayed conservative, stockpiling a staggering amount of cash and buying very little in stocks. Berkshire also repurchased far fewer shares of its own stock than it has in past years.

Whether Buffett and Berkshire foresaw a Trump win in the election and the ensuing trade battle is unknown. But it's clear that Buffett and Berkshire didn't like what they were seeing and largely stayed on the sidelines. With the broader benchmark S&P 500 down about 10% this year (as of April 22), the big question is: When will the Oracle of Omaha turn bullish?

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Tell-tale signs of Buffett

Investors typically only get a look at what large funds like Berkshire are buying once every 90 days or so. That's because large funds are only required to disclose their stock holdings within 45 days of the end of each quarter. Since the first quarter ended on March 31, Berkshire won't need to submit a 13F filing until around May 15.

Sometimes, funds will need to file within days of a trade if they acquire a large enough position in a stock or already own a significant amount of a stock they are buying. Berkshire owns large stocks in many of its holdings because its portfolio is so big that to make a difference, it often ends up acquiring a significant amount of a company's outstanding shares. For instance, Berkshire owns nearly 44% of Davita, over 35% of Sirius XM, and over 28% of Occidental Petroleum.

As of this writing, Berkshire hadn't submitted any filings disclosing large purchases of new stocks or adding to shares of companies it owns a sizable position in that would require a filing. That doesn't mean Berkshire isn't buying, but we also know that Buffett and the Berkshire team are disciplined and not willing to jump in unless they see "wonderful companies trading at fair prices."

Remember, prior to the tariff-induced meltdown this month, the market had pretty much only gone up for about 2.5 years. Despite the sell-off, there's no indication that the market is necessarily undervalued.

One metric Buffett likes to look at is called the Buffett indicator, which looks at the market cap of the Wilshire 5000, a benchmark for U.S. stocks, divided by U.S. gross domestic product. Although the Buffett indicator hasn't been below 100% since 2013, it still looks expensive at 176%, which is down from recent all-time highs of over 200%.

The Shiller CAPE ratio, which looks at the market cap of the S&P 500 divided by its 10-year average, inflation-adjusted earnings, has dipped down to about 33, near its five-year average but still above its 10-year average.

Data by YCharts.

Buffett has a war chest but will likely be patient

With over $330 billion of cash, cash equivalents, and short-term Treasury bills, it's clear that Berkshire has a war chest of cash it can deploy if something catches its interest. Berkshire has been keen to grow existing positions, so that trend may continue, and Buffett has also been very interested in Japanese stocks lately.

Berkshire has also made plenty of great investments in different periods of market turmoil, like when the company bought interests in banks in the wake of the Great Recession. But it's not clear that the market or the U.S. economy has escaped any kind of downturn just yet.

There are still many questions regarding where things will shake out with tariffs and what global trade will look like once everyone has played their cards. The consumer was also starting to show some cracks heading into the tariff drama, and the economy may yet still fall into a recession.

I doubt Buffett will want to be early with so much uncertainty still in the air. For these reasons, I'm guessing Buffett and Berkshire stayed fairly conservative in the first quarter of the year and will remain very selective regarding any near-term purchases. We'll know for sure in a few weeks.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.