In an interview with CNBC, Warren Buffett, Berkshire Hathaway’s (BRK-B) chairman, said, “It does look like the pace of increase in the economy has slowed down.” He added that “it does look like it’s slowing down. I don’t mean it’s reversing course, but it does seem from all of the businesses, especially the railroad statistics.”
Buffett isn’t alone on seeing a looming economic slowdown. Several observers expect US economic growth to slow down considerably this year. Referring to the yield curve inversion that we saw last week, Michael Strobaek, Credit Suisse’s global chief investment officer, said, “We’re really going into a slowdown and a recession” but clarified that a recession isn’t “right here, right now.”
However, Bill Winters, Standard Chartered Bank’s CEO, said, “This idea that we are in a straight line to a recession sometime next year looks less likely today.” Janet Yellen, a former Fed chairman, was also positive. In response to a question on whether the yield curve inversion points to a downturn, Yellen said, “My own answer is no, I don’t see it as a signal of recession.”
Economic growth is slowing down this year. The slower growth is reflected in several leading indicators. Earlier this month, the Fed lowered its 2019 economic growth forecast. So far, Berkshire Hathaway, which has an enviable track record of outperforming the S&P 500 (SPY) over the last five decades, has underperformed in 2019. Apple (AAPL), Kraft Heinz (KHC), Southwest Airlines (LUV), Delta Air Lines (DAL), and Coca-Cola (KO) were among Berkshire Hathaway’s holdings at the end of the fourth quarter. The company exited Oracle (ORCL) and took a stake in Red Hat (IBM) in the fourth quarter.