Many people think inflation and yields always fall in a recession, as they have in recent experience, but the historical data doesn’t agree. While this doesn’t provide a surefire answer for the direction of rates, it informs portfolio construction when a recession isn’t sure to lower yields.

Thanksgiving is an appropriate time to discuss the “Turkey problem.” Thinking about the life experience of a Thanksgiving turkey has much to teach us about investment risk management and the automatic human response to our built-in tendency for our brains to see patterns even when they do not exist.

Berkshire’s $296 billion very concentrated investment portfolio comprises 49 companies, with tech, energy, and financial stocks among the most significant exposure. One holding was eliminated, five decreased, five increased, and Berkshire made three new purchases.

While last week’s consumer inflation (CPI) reading may have cracked open the window for avoiding recession, a little-known but powerful recession indicator began flashing red last week. This indicator has forecasted every recession since 1973 and has helped predict future stock returns.

The better-than-expected inflation data ignited a strong stock rally last week. While the improvement in the inflation data is welcome, markets have overreacted previously to better inflation data, so beware of reversals if expectations for Fed hikes need to rise again.

The midterm elections on Tuesday typically provide a positive catalyst for stocks over the next year. With this earnings season winding down, actual earnings are likely to remain below estimates at the end of the quarter. The CPI report will provide another data point to adjust Fed expectations.

Berkshire Hathaway posted a quarterly loss of almost $2.7 billion versus a profit in 2021. Operating earnings, which remove the distortion from market changes, rose by 20%. Management warned that some businesses are beginning to see the negative impact from slower economic growth.