Risk means more things can happen than will happen. -Professor Elroy Dimson, London Business School

We are all living in interesting times, as investors and as citizens of the world. Uncertainty is a constant in investing, but today’s environment presents some of the highest levels of unpredictability we’ve seen in years.¹ Consider just a few factors: escalating global trade tensions centered around tariffs, domestic political battles including abrupt government program cuts led by Elon Musk and DOGE, and ongoing geopolitical instability in Ukraine, Russia, and China. These forces combine to create an investment landscape that can feel uneasy. Recent stock and bond market volatility certainly reflects this uncertainty.²

During times like these, it’s natural to wonder whether investors should make big moves in response to short-term developments – specifically, selling off stocks and bonds to sit on the sidelines with a hoard of cash. Headlines about Warren Buffett and Berkshire Hathaway’s record-level $334 billion cash reserves at year-end 2024 have only fueled that debate.³ But history has shown that a disciplined, diversified approach to investing across global markets and asset classes is an effective way to navigate risk and capture opportunity.⁴ Even Buffett acknowledged this in his latest annual letter to shareholders: "Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities. That preference won't change.⁵" Yes, Berkshire is holding more cash than usual. But more than 70% of its portfolio remains invested in equities (public and privately-held),and even its highly-liquid insurance portfolios are more than 50% invested inequities.⁶
‍

‍

The key takeaway here is that risk management can be critically important in times of great uncertainty, but reacting emotionally can lead investors astray. Staying disciplined and diversified tends to be a more productive approach.⁴ Think of it like flying with a chance of turbulence ahead. As your investment team, we advise fastening your seatbelts; not abandoning the plane. We believe it’s likely we’ll encounter more market bumps in the coming weeks and months⁸ – and we’ve been selectively rebalancing and trimming equity exposure in portfolios where we believe is prudent – but it’s also possible the flight turns out smoother than expected. In either case, we remain focused on navigating the course that aligns with your personal long-term financial goals.

The entire team at Sapient is grateful for the opportunity to serve you.

Sources:

1.       Economic Policy Uncertainty Index, March 7, 2025: https://www.policyuncertainty.com/index.html

2.       Wall Street Journal, March 6, 2025: https://www.wsj.com/livecoverage/stock-market-today-dow-sp500-nasdaq-live-03-06-2025?mod=livemarkets-ribbon

3.       The Motley Fool, March 3, 2025: https://www.fool.com/investing/2025/03/03/berkshire-hathaways-extraordinary-cash-position-is/

4.       UBS Global Investment Returns Yearbook 2025: https://www.ubs.com/global/en/investment-bank/insights-and-data/2025/global-investment-returns-yearbook-2025.html

5.       Morningstar UK, February 25, 2025: https://www.morningstar.co.uk/uk/news/261319/warren-buffett-dismisses-concerns-about-cash-holdings.aspx

6.       Forbes, February 23, 2025: https://www.forbes.com/sites/bill_stone/2025/02/23/takeaways-from-berkshire-hathaways-2024-earnings-and-buffetts-letter/

7.       Image Source: https://x.com/CheddarFlow/status/1893069003180122230

8.       Wall Street Journal, March 7, 2025: https://www.wsj.com/economy/central-banking/week-ahead-for-fx-bonds-u-s-inflation-data-bank-of-canada-decision-due-d1cd5cc1?mod=economy_lead_pos1

Although the statements of fact and data in this report have been obtained from, and are based upon, sources that the firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed. All opinions included in this report constitutes the Firm’s judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results. Indexes, such as the S&P 500 Index, are not directly investable. Sapient is not affiliated with Berkshire Hathaway and the two entities invest differently. Details about Berkshire’s cash position are provided to illustrate its risk management approach.

‍