Warren Buffett, the "Oracle of Omaha," has recently issued warnings about the US stock market and the country's fiscal policies, and has rarely criticized the Trump administration's tariff policy, pointing out that it could have a negative impact on the US economy. Against the backdrop of record-high stock market valuations, Buffett has warned investors to remain cautious and has raised concerns about the impending economic risks.
Buffett Criticizes Trump's Tariff Policy: This is an Act of War, Exacerbating Inflation Risk
CBS News recently invited Buffett to appear on a program, and during the interview, when the host asked about the current economic situation, Buffett took a rare stance, stating that Trump's tariff policy is "in some ways a form of war" and has driven up prices, leading to inflation.
The punitive tariffs imposed by Trump may have a negative impact on the US economy, and ultimately, the American consumers will bear the higher costs.
He stated:
Tariffs are not simply a trade tool, but in the long run, they will actually become a "commodity tax," driving up prices and further exacerbating inflationary pressures... Tariff policy is "a form of war," and warned that these measures could inflict lasting damage on the US economy.
Buffett had previously expressed his views on the trade conflicts of the Trump administration in 2018 and 2019, but this time he was more outspoken, believing that tariffs will directly pass on the adverse effects to consumers.
Buffett's Indicator Breaks 200%, Heightening Concerns over Stock Market Bubble
On the other hand, Buffett has long used the "Buffett Indicator," which is the ratio of the total market capitalization (S&P 500) to the US GDP, to assess market valuations. When this indicator exceeds 200%, it means that the market value is too high and there are underlying risks.
According to the latest data, this indicator has broken through 200%, reaching a historical high, which has also prompted Buffett to warn again that the market may face bubble risks. Although the S&P 500 index has recorded a 25% increase over the past year, Buffett has chosen to reduce his stock holdings for nine consecutive quarters, a strategy that reflects his concerns about the market's overvaluation.
The latest financial report of Berkshire Hathaway, Buffett's conglomerate, shows that the company's cash reserves have risen to a record $334.2 billion, nearly double the figure from the same period last year, with cash accounting for 53% of its net assets.
US Fiscal Risks Raise Concerns, Buffett Expresses Dissatisfaction with Policies
In his latest annual letter to shareholders, Buffett mentioned that the US fiscal policy is facing the risk of "fiscal foolishness," and warned that if this situation continues, it could lead to the erosion of the currency's value. He pointed out that while some countries have become accustomed to high deficits and high inflation fiscal policies, the US has also come close to this dangerous edge in its history. Buffett emphasized:
If the fiscal deficit continues to expand in the future, it will have a significant impact on the value of the US dollar and the stability of the global economy.
These remarks not only express concerns about the US fiscal situation, but also align with the views of other financial heavyweights. Jeffrey Gundlach, the so-called "New Bond King" and CEO of DoubleLine Capital, and Ray Dalio, the founder of Bridgewater Associates, have both warned that the US debt problem has reached a dangerous level, and if the debt continues to expand, it could trigger a debt crisis and even require restructuring.
