To The Moon

For week ending 19 Jul 2025, Wall Street banks are coining it in Donald Trump’s America.

Goldman Sachs this week reported a +22% jump in profits, driven by record trading revenues as tariffs roiled stock markets.

Citigroup’s profits jumped by +25%, beating analysts’ expectations.

Even the $KBW Bank Index(BKX)$ closed to an all-time high. (see above)

However, not everyone is convinced that the good times are going to last.

Warren Buffett, the Sage of Omaha, has been shedding his US bank holdings, again.

At the start of 2025, Buffett’s $Berkshire Hathaway(BRK.B)$ sold about $3.2 billion of shares in American banks and financial companies.

Buffett sold about:

• $1billion stake in $Citigroup(C)$.

• Ditched shares worth more than $2 billion in $Bank of America(BAC)$ .

• Dropped some of its holdings in Capital One.

Despite the recent sell off, Berkshire still has substantial holdings in the banking sector.

Of its current portfolio,:

• 16.4% is invested in American Express.

• 10.1% is still in Bank of America.

However, exposure has definitely been reduced.

As remarked by Larry Cunningham, Director of John L. Weinberg Centre, University of Delaware:

• Berkshire has clearly been reducing its exposure to US bank stocks.

• It signals a cautious or even bearish outlook on banking.

Then again, moves of this size are not unusual for Berkshire Hathaway.

It is hard to know how much of Berkshire’s selling reflects macro-economic pessimism vs firm-specific or internal considerations” says Cunningham.

Mr Buffett, arguably the most successful investor of all time, has a reputation for being preternaturally gifted at foreseeing market trends.

The 94-year-old, who will retire as Berkshire Hathaway chief at the end of 2025, built a record cash pile of $350 billion before markets slumped earlier this year, leading analysts to say he had seen the crash coming.

Millions of loyal followers watch his every move.

Could Buffett’s decision to sell banking stocks signal a slump is on the cards?

Policy roller-coaster

Buffett is not alone in off loading bank stocks.

Jamie Dimon, CEO, JP Morgan, sold around $31.5 million of his JPM holdings just in April 2025.

This followed a sale of JPM shares worth $125 million in 2024, that was actually his first sale since he took the top job in 2005.

Many analysts believe Trump’s economic policy roller-coaster is going to finally hit the American economy in H2 2025.

US’s headline inflation rose to +2.7% in June 2025, with economists saying It is a sign of things to come.

Banks will be the canary in the coal mine for any economic issues.

Trump’s recent threats to sack Fed’s chairman Jerome Powell will only add to concerns that economic policy is going off the rails.

Buffett may have made a bet that America’s banks have peaked.

According to TD Securities, Hd of US rates strategy, Gennadly Goldberg:

• Part of this could be driven by expectations that these current equity valuations are not sustainable.

US banks have had a great run but there are clear problems on the horizon for (a) the sector, and (b) the broader US economy.

One of the biggest questions is the outlook for long-term government borrowing costs.

Trump’s trade tariffs are widely expected to drive up inflation, that in turn will mean higher yields on US Treasuries as investors demand greater returns.

Banks would benefit from higher interest rates on their bond portfolios, but higher Treasury yields will drive a wave of new pressures across the lending sector.

Bad loans could increase as borrowers struggle to repay.

Higher Treasury yields would make other investments look less attractive, triggering a drop in mergers and acquisitions activity.

That will be bad news for the investment banks that have been doing so well up until now.

Reality check

Then there is the question of what happens to Powell at the Fed.

If Trump does oust the Fed chairman and replace him with someone more pliable, interest rates would likely fall but longer-term borrowing costs, namely 10-year Treasury yields, would soar on expectations of higher inflation in the future.

Lower borrowing costs would also stoke concerns about inflation.

Pimco, co-founder, Bill Gross cautioned on “X”:

• Investors wake up!

• He is moving defensively - more cash, buying value with 4% -5% dividend yields.

• With emphasis on non-US bond.

US banks’ CEOs have also been sounding the alarm, urging against ousting Fed chair:

• David Solomon of Goldman Sachs.

• Jane Fraser of Citibank.

• Brian Moynihan of BofA.

• Jamie Dimon of JP Morgan Chase.

Beyond what happens at the Fed, concerns are growing about the outlook for US economy.

Trump’s trade war is injecting sand into the engines of growth.

Numerous forecasters have slashed their expectations for growth, including the Fed, which has twice cut its GDP forecast for 2025 to 1.4%, down from 2.1% in December 2024.

At Validus Risk Management, Chief investment officer, Kambiz Kazemi:

• Believes a “reality check” is coming.

• Uncertainty around tariffs, and most subjects (in general), including the way Trump administration is running things, will slowly erode the trust in the system.

• The reality will catch up.”

• When US economy deteriorates, banks always underperform the wider market because of their central function in US economy via their loan books.

• So far, most US banks’ trading arms have been benefiting hugely from the volatility as investors scramble to move stocks around.

• Other divisions (within banks) that write loans, advise on deals or underwrite international trade will not fare as well.

• The big, big red flag is going to be consumption.

• If things cost more because inflation has gone up or if unemployment goes up, it is going to affect consumption.

• When consumer spending goes down, there will be a ripple effect on everything to do with borrowing. It becomes a bit of a feedback loop.

In other words, buckle up and do not bet on banks.

One other thing to note about Berkshire is its leaning more into energy and consumer goods lately.

For example - $Occidental(OXY)$ (see below) and Constellation Brands.

• Are you just as surprised to learn that Mr Buffett had bought OXY on 2 occasions in Q3 2019 & Q4 2019.

• However, he sold them at a lost in Q2 2020 (during Covid-19).

• His latest stab at OXY came after a 22 months hiatus.

He has since been ‘dollar cost averaging’ into OXY:

• On 4 occasions when OXY stock price was rising.

• On 5 occasions when OXY was falling.

Does this mean Buffett is shifting towards sectors seen as more resilient in an ever increasingly volatile environment?

My viewpoints (mine only)

Below traces Berkshire Hathaway’s purchase & sales of BofA.

• Mr Buffett first purchased BAC back in 2017, then 2018 and H1 2019.

• His ‘first’ sale was in Q3 2019.

• His next purchase was during Covid-19 month of July 2020.

• Between July 2024 to October 2024, Mr Buffett began divesting BAC, completing the sale just before US presidential election in early November 2024.

• During Berkshire Hathaway’s Annual Meeting in May 2024, Mr Buffett explained his sales of AAPL shares was due to ‘favourable’ federal capital gains tax rates at a relatively low 21%.

• He expected capital gains tax rate to increase in the future given US fiscal policies and rising budget deficits.

• Looking back to a year ago, his views on (1) US fiscal policies and (2) rising deficits have both come true - looking at the chaos sowed by the current administration.

• His assumption of rise in capital gains tax rate, however was wrong.

• It remained status quo @ 21% from May 2024 until present.

BAC past month performance - as of 18 Jul 2025

• Would Berkshire make even more profit, if it sold its BAC shares now, when prices are high, instead of in 2024 or early 2025?

• Another observation I gathered is that Mr Buffett did not purchase BAC when it was at its lowest, neither did he sell when it was at it highest.

• His magic lies in the sheer volume of shares purchased and sold.

For individual investor (like myself), it will be ‘hard’ to have the same effect / impact. Still a dollar earned is a dollar gained, right !

Remember to check out my other posts. (See below). Help to Repost ok, Thanks.

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• Do you think it is time to sell US bank stocks and lock in profits ?

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