Since the second half of the year, "Oracle of Omaha" Warren Buffett's Berkshire Hathaway has been reducing its stake in Bank of America, cumulatively cashing out over $10 billion. In addition to tax considerations, as the three major U.S. stock indices once again charge towards historical highs, valuations are also seen by outsiders as a major factor in the sell-off. JPMorgan Chase CEO Jamie Dimon recently expressed a cautious attitude towards buybacks, considering cash as an important asset. Data shows that after the Federal Reserve began its rate-cutting cycle, the scale of U.S. money market funds is still setting new records.

Buffett Continues to Sell Bank of America Shares

Buffett is one of the most respected investors in the world. For nearly 70 years, he has brought investors incredible returns. On August 28th of this year, Berkshire's market value exceeded $1 trillion for the first time, a more than 40,000-fold increase from $22 million when he took office in 1965.

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The movements of the "Oracle of Omaha" have also attracted widespread attention. Last week's securities filings indicated that Berkshire sold approximately 9.5 million Bank of America shares in batches at an average price of about $40, worth about $380 million. The sell-off, which began in mid-July, has cumulatively reached $10.5 billion, and the cost has been recovered. The proportion of the bank's issued shares held has been reduced to 9.99%, approximately 775 million shares.

Looking back at history, Buffett first purchased Bank of America shares worth $5 billion after the financial crisis in 2011. Until the end of last year, Buffett steadily increased his holdings in Bank of America shares, becoming the bank's largest shareholder. In 2019, Berkshire applied for approval from the Federal Reserve to increase its stake to more than 10%.

It is worth mentioning that Bank of America's stock price has performed poorly throughout the selling process. As of July 16th, the bank ranked first among the 24 banks in the KBW Bank Index, but by the end of the third quarter, it had fallen to second to last. According to the regulatory requirements of the U.S. Securities and Exchange Commission, since the stake is below 10%, further reductions by Buffett may have to wait until the quarterly report is released.

The 94-year-old "Oracle of Omaha" has not commented on why he exited this investment from beginning to end. Last month, at the Barclays Global Financial Forum, when asked about this, Bank of America CEO Moynihan referred to Buffett as a "great shareholder" and explained that he did not know why Buffett was selling, but he was not worried.

It should be noted that Bank of America is not the only company that Buffett has recently sold a large stake in. He has sold more than half of his stake in Apple for three consecutive quarters since the fourth quarter of 2023. Although this technology giant remains Berkshire's top holding, the amount sold in the second quarter has set a historical high.

In fact, since the fourth quarter of 2022, Berkshire has been a net seller of stocks for seven consecutive quarters. Considering the持续性 of selling Bank of America, it is very likely that the next financial report to be released next month will further extend this trend.

Outsiders believe that taxes are a major factor in the reduction. After the current tax law expires in 2025, the current corporate income tax rate will rise. Democratic presidential candidate Harris has proposed a corporate tax rate of 28%. Republican presidential candidate Trump may push to continue the 21% tax rate he previously set, but given the current government deficit, such a tax rate is likely to be unsustainable.Additionally, sell-offs may also be due to potential economic recessions, high valuations, and the deterioration of consumer financial conditions. U.S. banks are facing headwinds such as increased credit losses, leverage risks, and sluggish loan growth, which reduces their attractiveness. With the rise of digital banking, the bank's competitive moat is weakening, and its valuation is high compared to peers.

JPMorgan Chase Cautious on Share Buybacks

Similar to Buffett, JPMorgan Chase CEO Jamie Dimon is not in a hurry to spend the cash position held. As of the end of the third quarter, the bank had $1.5 trillion in cash and marketable securities.

Regarding whether the bank will increase the deployment of funds and what opportunities are believed to use this money, the head of the largest U.S. bank said in the earnings call that the current market and macro conditions require patience. "In a turbulent world, cash is sometimes a very valuable asset. You see my friend Buffett is now hoarding cash."

When asked about his views on market valuations, Dimon believes that the overall level is at least slightly inflated. "I don't know if they are extremely inflated or a bit inflated, and I believe there will be better opportunities to repurchase stocks at cheaper prices. The market will not stay high forever."

At the same time, Dimon maintains a cautious attitude towards the economy. "For some time, we have been closely monitoring geopolitical situations, and recent events indicate that the situation is dangerous and getting worse. The results of these situations may have a profound impact on short-term economic outcomes, and more importantly, on the course of history."

According to data from the London Stock Exchange Group (LSEG Datastream), the S&P 500 index is 21.5 times the expected earnings for the next 12 months, close to the highest level in three years, far above its long-term average of 15.7 times. Sameer Samana, Senior Global Market Strategist at Wells Fargo Investment Institute, said: "As prices rise, you really need earnings growth, which may be much better than the expected level."

As the market digests the expectations of interest rate cuts, the scale of U.S. money funds has continued to rise sharply since the second half of the year. Federal Reserve data shows that the total scale reached $6.54 trillion in the week when the interest rate cut was initiated.

Even if the monetary policy shift is implemented, the pace of capital inflows has not been reversed. Data from the U.S. Investment Company Institute shows that in the week ending October 2, money market funds increased by about $38.7 billion, with total assets reaching a record level of $6.46 trillion. The quarterly capital inflow is the largest since the banking crisis in March 2023.