Noting Buffett’s Cash Hoard, Bob Doll Warns of Stock Pressure

News November 18, 2024 at 03:40 PM

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The stock market’s long-term outlook appears “demanding” even as expectations for tax cuts and deregulation under a new Trump administration fuel bullish sentiment, Crossmark Global Investments CEO Bob Doll said in his weekly commentary Monday.

Doll, also Crossmark’s chief investment officer, who is known for his annual 10 Predictions list, noted that Warren Buffett’s Berkshire Hathaway now has 28% of its assets in cash, the highest level in over 35 years, “highlighting his risk-off caution.”

While market bulls focus on tax tailwinds, anticipated deregulation, heightened investing and good earnings, “those less bullish worry about stretched valuations, bond yield backup, renewed inflation concerns and overly bullish sentiment,” he wrote.

“The longer-term setup for the equity market is demanding, given the high starting point for valuations and already high earnings expectations. Moreover, sticky inflation and upward pressure on bond yields could eventually challenge the positive market sentiment,” Doll said.

Earnings estimate upgrades, which Doll considers unlikely, would be needed to fuel further meaningful upside in stock prices, he added.

The Federal Reserve, meanwhile, is likely planning further interest rate cuts, Doll said, noting that slowing the pace would provide more time to gather data on inflation and unemployment. The central bank will like slow the pace, given recent gains in the U.S. dollar since, he wrote.

Image: Chris Nicholls/ALM; Bloomberg

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