Category: 3. Business

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The investing giant hasn’t offered us exact reasons for his decision, but since we do know that he favors buying stocks for a good price, it’s fair to say that one key element may be holding him back. And this is valuation.

A look at the S&P 500 Shiller CAPE ratio shows us that stocks are at one of their most expensive levels ever. The metric, a measure of stock price in relation to earnings over a 10-year period, recently climbed to 40, a level it’s only reached once before since the S&P 500’s formation as a 500-company benchmark.

Now, let’s consider what history has to say about what may happen in 2026. At times when Berkshire Hathaway’s cash levels have been on the rise and reached a peak, the S&P 500 then has taken a dip, as you can see in the chart below, particularly in early 2016 and then toward 2017. The S&P 500 Shiller CAPE ratio also has been on the rise prior to these stock market dips, suggesting valuation may play a role in this trend.

This historical pattern suggests we may see a dip in stocks in 2026 — but this doesn’t necessarily mean that the year will finish in the negative. Stock market declines that have followed Buffett’s increases in cash levels generally have been short-lived, and most important of all, the S&P 500’s declines always have resulted in recovery and gains in the years to follow.

So, what does all of this mean for investors? Buffett’s actions imply opportunities aren’t overly abundant right now — and that could start weighing on demand for stocks. This “warning” means investors should pay close attention to valuations and avoid buying stocks that are overpriced or have questionable long-term prospects.

Fortunately, though, if stocks do slip in 2026, history shows us these periods aren’t long lasting — and that’s why investing for a number of years has been a winning strategy for Warren Buffett and could be a winning strategy for you too.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

Warren Buffett, Weeks Before His Retirement, Has a Warning for Wall Street. History Says This May Happen in 2026. was originally published by The Motley Fool

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I am deeply honored to have been asked to speak here today about the remarkable legacy of George Shultz. Just to be clear, I will not address current economic conditions or monetary policy.

I have been an admirer of George Shultz since my college years. I saw him then and now as a great role model, as I mentioned a few months ago when delivering the Baccalaureate address to Princeton’s class of 2025, 50 years after my own graduation.¹

As I told the graduates, when I faced the world after college, I had no real plan, but knew that I wanted to combine a private-sector career with public service. I had in mind a few well-known public figures of the era, especially George Shultz, whose picture was on the wall of the Princeton eating club of which both of us were members. George may also have caught my attention because my dad was a labor lawyer who represented one of the major steel companies in collective bargaining. Like George, my father had both a belief in the collective bargaining process and a deep respect for workers.

I followed George’s career with interest through the years. It didn’t occur to me that I would ever have the honor of meeting him. But I did meet him after I joined the Fed in 2012, as I visited Stanford from time to time. I remember energetic economic discussions at group lunches in his conference room at Hoover. George was also kind enough to host John Taylor, Michael, and me for a chilly round of golf on a rainy March day.

Today, our focus is on George’s extraordinarily broad economic accomplishments. I also want to celebrate the remarkable man and policymaker that he was. Several things stand out for me.

He was a man who combined strong principles and unshakeable integrity with common sense and a practical, problem-solving approach to policy. He had a deep belief in the wisdom of markets and a desire to let them work whenever possible without government direction. That theme runs through many issues we will discuss, including collective bargaining, wage and price controls, and exchange rates.

But he was not an absolutist and saw that there are sometimes market failures that should be addressed by public policy. As one of the most successful policymakers of his era, George brought the intellectual rigor of an academic to the practical, constrained, messy work of policymaking. Through four cabinet appointments, he dealt with many of the great issues of his day, with remarkable success. And he kept at it long after leaving public office, making important contributions on health care reform, climate change and nuclear disarmament.

He may be less well known for this, but George Shultz was deeply concerned about racial discrimination in the workplace and our society more broadly. He consistently and effectively used his positions of authority to increase opportunities for minorities. He later noted that there was both a moral and an economic basis for this.

He stuck to his principles while also treating people with honesty and respect, including those with whom he had policy disagreements.² Labor leaders welcomed his appointment as Secretary of Labor. As many of his contemporaries remarked, faced with divergent views and difficult issues, he was extraordinarily good at steering people toward agreement. A key part of that strategy was to let the parties reach the final agreement themselves. That way, they owned the agreement and were more likely to honor it. His friendships and collaborations were beyond number, and knew no partisan bounds.

He often said that trust is the coin of the realm, and that good things were only possible where there was mutual trust.³ His integrity provided the basis for that trust. All of those who aspire to serve the public can learn from his example.

1. See Jerome H. Powell (2025), “Baccalaureate Remarks,” (PDF) speech delivered at Princeton University, Princeton, N.J., May 25. Return to text

2. See Charles Moritz, ed. (1970), Current Biography Yearbook 1969 (New York: The H.W. Wilson Company). Shultz’s background as a mediator served him well in economic policymaking, and Paul Volcker would later say of Shultz, “Time and again he would work with almost inhuman patience to bring a group to agreement upon a decision all could support, at times submerging his own preferences”; see Philip Taubman (2023), In the Nation’s Service: The Life and Times of George P. Shultz (Stanford, Calif.: Stanford University Press), p. 23. Return to text

3. Shultz summed up his views in this area in the mottoes “Trust is the coin of the realm” and “Respect your adversaries”; see George P. Shultz (2016), Learning from Experience (Stanford, Calif.: Hoover Institution Press). Return to text