Warren Buffett Sounds Alarm on US Fiscal Policy Amid Market Concerns

Warren Buffett, the renowned investor and chairman of Berkshire Hathaway, has expressed significant concerns regarding the current state of fiscal policy in the United States. At the recent Berkshire Hathaway annual shareholder meeting, Buffett highlighted that this issue is more pressing to him than the concerns surrounding a potential artificial intelligence bubble. His comments come as Berkshire Hathaway has been a net seller of US stocks for the past three years.

Buffett’s apprehensions stem from the alarming fiscal deficits that many countries are grappling with. In the 2024/25 tax year, the UK recorded an estimated deficit of A£148.3 billion. In contrast, the situation in the United States is even more severe, with a staggering $1.8 trillion deficit. Since 2002, the US government has consistently operated at a fiscal deficit, and the situation has only worsened over time.

Historically, the US has managed this gap through borrowing, which was feasible when interest rates remained near zero for an extended period. However, this strategy is becoming increasingly untenable. As interest rates rise, a larger portion of national budgets must now be allocated to servicing debt, leaving less room for public investment. This development places mounting pressure on policymakers to either reduce public spending or increase taxes—options that are politically contentious and often unpopular.

Buffett articulated his concerns directly, stating, “Fiscal policy is what scares me in the United States.” This candid assessment underscores the gravity of the situation as the US government seeks to navigate a fiscal landscape marked by uncertainty.

In light of these concerns, Buffett’s investment strategy reflects a cautious approach, as evidenced by his recent trading activity. Despite trimming many of his US stock positions, he has selectively invested in companies he believes hold promise. One notable example is Berkshire Hathaway’s increased stake in Domino’s Pizza (NASDAQ: DPZ).

The pizza chain has encountered challenges in recent years, facing diminished demand as consumers tighten their budgets. Yet, Domino’s has maintained a competitive edge through its highly efficient order and delivery system. This technological advantage has allowed the brand to outperform rivals such as Papa John’s and Pizza Hut, even as it grapples with rising food inflation and slowing sales.

Buffett’s interest in Domino’s signals his belief that opportunities still exist in the market, even amidst broader economic challenges. His selective investments highlight the potential for finding undervalued stocks that might weather the storm of fiscal uncertainty.

As investors consider their own portfolios, Buffett’s insights serve as a reminder to remain vigilant about macroeconomic trends while also seeking out solid investment opportunities. The current fiscal landscape may present obstacles, but strategic investments in resilient companies could still yield positive results.