Berkshire Hathaway may face a significant hit in its stock value if the Federal Reserve cuts interest rates. The Fed is expected to lower its key rate by a quarter point on Wednesday, which could lead to short-term rates around 3% by late 2026.
The company has an enormous cash pile of $340 billion, mostly invested in Treasury bills that mature within a year. A one-point reduction in short rates would cut Berkshire’s annual interest income by over $3 billion, affecting its after-tax operating profits. This could be up to 5% of the company’s total profit, which stands at nearly $45 billion annually.
Berkshire’s stock has been down due to various factors, including investor preference for more aggressive “risk-on” stocks and lower interest rates already impacting the company’s business. Berkshire CEO Warren Buffett remains committed to maintaining a cash-rich portfolio, but this could lead to further losses in the short term.
Source: https://www.barrons.com/articles/berkshire-hathaway-stock-price-fed-interest-rate-c63f962f?siteid=yhoof2