Markets stage late rally as Buffett exits the airlines

Stocks rebound to start the week thanks to a late surge by big tech as Buffett exits his airline stocks and announces he made no further investments despite the March sell-off

Daily Performance

S&P 500: +0.4%

Dow: +0.1%

Nasdaq: +1.2%

With the S&P 500 down 3.7% in the final 2 days of last week, one couldn’t help but wonder if the slide was a signal of what was to continue today and for the rest of the week. It looked as though it may have been that way as we were lower for much of the day until the market once more was led out of the red by big tech including Microsoft (+2.4%) and Netflix (+3.0%).

Equities were also supported by continued re-openings of nonessential business across various states and the easing of stay-at-home orders despite the US having its most deadly 24 hours between Thursday and Friday. Providing these re-openings go smoothly, we can expect to see markets edge higher, although any sign of that second wave could halt the market in its tracks. Add to this the renewed political tensions between China and the US over potential tariffs over COVID-19 and it remains clear that this market is unquestionably fragile.

Buffett: The airline industry "is much less clear to me"

Stocks hadn’t been helped by Warren Buffett’s comments over the weekend in which he disclosed that he had sold his airline holdings – totalling more than $4 billion - including American Airlines (-7.7%), Delta (-6.4%), SouthWest Airlines (-4.13%) and United Airlines (-5.1%), as he admitted selling his stakes at “far lower prices” than he paid for them amidst a future for the industry that “is much less clear to me”. With Buffett perceived by many as the world's leading long-term investor, his negative outlook for the future of airlines persuaded other investors to follow suit today.

Perhaps even more interesting was the significant amount of cash Buffett stated he has in Berkshire Hathaway’s portfolio (Buffett’s holding company). He commented that despite the incredible sell-off, he doesn’t “see anything that attractive” to invest in - only time will tell as to whether Buffett has arguably missed on a once-in-a-decade opportunity.

For those wondering how best to navigate the market for the long-term in this environment, Buffett offered up some advice, “In my view, for most investors, the best thing to do is owning the S&P 500…you’d do far better than following people”. Although Buffett's advise against stock-picking or selecting certain strategies is one that may save both time and money in lockdown, it is one that for many - myself included - would make lockdown a whole lot less fun!