After a strong start of the year, the stock market ended up in a correction at the end of February. The persistent trade tensions have increased the concerns about inflation and a possible recession, which has led to a sharp fall in risky assets such as shares and crypto coins.
President Trump’s decides to introduce new import rates, increases the costs for companies and puts pressure on the profits of export -oriented companies. Metaling measures are not elected: the European Union has previously imposed additional import duties on American products in response to the US trade policy. Now the threat is increasing that other trading partners will take similar steps, which further increases economic uncertainty.
In addition, the threat of rising inflation fuels the chance of higher interest rates, which not only puts pressure on the profit margins of companies, but can also slow down broader economic growth.
At the time of writing, the S&P 500 index has fallen to 5,599 points, a loss of 4.8% since the start of the year.
Warren Buffett’s strategy: cash, government bonds and patience
In uncertain market conditions it can be wise to look at the strategies of experienced investors. Warren Buffett, CEO of Berkshire Hathaway, has proven itself time and again as one of the most successful investors in the world. He has been warning about overvalued shares for quite some time – and those warnings now seem well -founded.
Buffett has been cautious for some time, which is not surprising considering the current market conditions. The stock market is located on historically high ratings, and Berkshire Hathaway was a net seller of shares in both 2023 and 2024.
In 2023, Buffett sold no less than $ 134 billion in shares, a significant increase compared to the $ 34 billion he repelled a year earlier. He currently holds a record amount of $ 334 billion in cash, in addition to $ 286.5 billion in US government bonds.
Despite its defensive attitude, Buffett will stick to his conviction that shares perform better in the long term than cash. Berkshire Hathaway has recently increased a few positions and added a new investment, but the general strategy indicates an expectation of a substantial fall in market. Buffett seems to be preparing for future buying opportunities and wants to be in a strong position when the market is going through a correction.
What can investors learn from this?
Retail investors who want to follow Buffett’s strategy can consider reducing risky investments and to focus more on defensive sectors. Buffett has recently reduced its positions in Exchange-Traded Funds (ETFs) and has increased its investments in energy and basic consumptions. Although this approach will probably not yield exceptional profits, it can help to limit large losses – especially now that the chance of a recession is increasing.
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Source: https://newsbit.nl/hoe-warren-buffett-zich-voorbereidt-op-de-aandelenmarkt-van-2025/
