Warren Buffett stepped down as CEO of Berkshire Hathaway but will remain chairman of the board and its largest shareholder. Due to his incredible investing success, he will still be known as the “Oracle of Omaha.” During Berkshire’s recent annual shareholder meeting, Buffett commented on this year’s stock market turmoil.
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He was unfazed by the recent volatility, telling shareholders, “What has happened in the last 30-45 days, 100 days, whatever this period has been, is really nothing.
Buffett provided a historical perspective, noting that the Dow Jones Industrial Average hit 381 in September 1929, nearly a year before his birth. It eventually plunged to 42, a decline of roughly 89%. He stressed, “This [the recent downturn] has not been a dramatic bear market or anything of the sort.”
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However, Buffett also warned: “You will see a period in the next 20 years that will be a ‘hair curler’ compared to anything you’ve seen before.
The world makes big mistakes, and surprises happen in dramatic ways. The more sophisticated the system gets, the more the surprises can come out of left field.”
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Buffett didn’t predict a specific timeline for a stock market crash but believes a significant sell-off will occur within the next two decades. He remarked, “That just happens periodically.”
The S&P 500 index has experienced 20% or more declines from its previous peak nine times since 1950, translating to a steep plunge on average once every eight years.
Based on historical trends, Buffett’s prediction seems likely to be proven right.
Buffett warns of future market turmoil
There has never been a 20-year period during which the S&P 500 didn’t fall by at least 20%.
Buffett’s famous quote, “Be fearful when others are greedy, and greedy when others are fearful,” underlines that stock market meltdowns present great buying opportunities for long-term investors. The main issue with Buffett’s dire prediction is the uncertainty of its timing. Adjusting your mindset is crucial to preparing.
Buffett advised shareholders, “I know people have emotions, but you’ve got to check them at the door when you invest.” He emphasized the importance of having the proper temperament for investing. Buffett also highlighted the importance of having cash ready to invest when opportunities arise. He practices this by building up Berkshire’s cash reserves when stock valuations are high and deploying cash when valuations are attractive.
In the meantime, don’t be afraid to buy stocks that meet your investment criteria. While Buffett has been a net seller of stocks recently, he has still made some purchases for Berkshire’s portfolio. If and when the “hair curler” stock market predicted by Buffett comes, making the right moves will ensure you can keep your portfolio straight, even when the market gets frizzy.
