When Warren Buffett speaks at Berkshire Hathaway’s annual shareholder meeting, everyone should listen. The comments at this year’s meeting that ended over last weekend were anything but positive for investors. “In the general economy, the feedback we get is that perhaps the majority of our businesses will actually report lower earnings this year than last year,” Buffett said. He followed it with two comments that put a scare into the markets – “We’ll start having sales at places where we didn’t need to have sales before,“ he said and then characterized that the period following the coronavirus pandemic by saying – “It was an extraordinary period,” he said. “And that period has ended.“
In the meantime, the Nasdaq officially exited a bear market as investors continue to pile back into tech stocks that have been shunned for much of the past year. This was in response to the drop in inflation for a 10th straight month in April to 4.9% from 5% in March. The drop in inflation gave some validity to the statement from Federal Reserve Chair Jerome Powell that the US economy can, in the aftermath of an inflation fight that just might be coming to an end, skirt a recession.
Future Wealth’s View
But, the data released on Friday shows a decline in consumer sentiment combined with expectations for higher inflation – the University of Michigan’s index of consumer sentiment in May sank to a six-month low while its five-year outlook for inflation spiked to its highest reading in more than a decade.
While more signs point to the US economy slowing and the Federal Reserve making progress in its inflation fight, the global economy could take an unprecedented hit as Republicans continue to demand unrelated cuts to spending as their price for letting America pay its bills. Fallout from a default could lead to a deep recession, a spike in unemployment and borrowing rates, a blow to national security and other ripple effects.
To quote Warren Buffett’s punch line from this year’s shareholders meeting – “Nothing’s sure tomorrow,” he said. “Nothing’s sure next year. Nothing is ever sure in markets or in business forecasts or anything else.”