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The recent sell-off of Apple stock by Berkshire Hathaway has sparked much debate on the Internet, and many, thanks to media outrage, see it as a sign that the market bubble may be bursting.
Some have even linked it to the recent plunge in the U.S. indices, including the S&P 500. The thing to keep in mind is that this massive sell-off is from the second quarter, not the days leading up to the market crash.
As always, we will only know what Buffett and his team have done in recent weeks when it is history. Relying on outdated information to shape your strategy is not always a good idea.
Similarly, hedge fund managers’ reduction of risk positions after a volatile week indicates a cautious approach. If the situation were dire, the correction would probably have persisted.
The bottom line is that, just as past performance is no guarantee of future results, past events should be considered but not the only reference when making decisions.
So, is there cause for concern?
As was the case six months ago, there are many reasons why the market could turn from bullish to bearish. For example, the commercial real estate market continues to struggle, and consumers suffer.
While recent macroeconomic solid data, such as the ISM services PMI, suggests that recession fears may be overblown, they are not entirely unfounded as the economy slows.
This week’s critical event for the US is the release of inflation data. A sharp price drop could trigger concerns that the Fed’s hawkish stance is pushing the country into a recession.
In turn, if we only see a continuation of the disinflation trend, it could raise expectations of a rate cut by the FOMC in September, increasing optimism that things will not spiral out of control.
