Recession Watch: Interest Rates Spike, Warren Buffett Sells

Higher For Longer (than expected)

When the Fed started cutting interest rates in September, the assumption was that rates would fall and the Fed would maintain the downward trajectory well into 2025. But interest rates didn’t cooperate. Across the yield curve, days like this one (November 2) have become the norm.

A rising 10-year Treasury yield translates into higher mortgage rates. They shouldn't be doing this in a Fed easing cycle. And if they stay up here, expect an epic housing bust in the coming year.

One of the points of lower interest rates is to put money into the hands of small businesses, the engine of growth in the US economy. That definitely hasn’t happened. Interest rates on small business loans have been rising since 2020, and instead of falling after the Fed’s September cut, they spiked:

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Warren Buffett vs the Stock Market

With AI making financial miracles and the Fed back in easing mode, stocks generally are doing well. And more investors than at any other point in recent history expect the gains to continue.

Meanwhile, legendary investor Warren Buffet is doing what he normally does at market peaks: he’s raising cash via his investment company Berkshire Hathaway. He sold off his Bank of America stock earlier this year and is now dumping Apple:

His cash pile is now far higher than it’s ever been.

To sum up: