4 Things Warren Buffett Would Likely Do After a Stock Market Crash
The stock market is a mercurial beast. No matter how smart and prepared you are, you will still, at some point in your investing journey, find yourself totally gobsmacked by the goings-on of the economy. Even Warren Buffett, dubbed the Oracle of Omaha because of his near uncanny ability to foresee the future of the market, doesn’t have a crystal-clear crystal ball.
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The performance of the stock market is key to that of the U.S. economy at large. Market crashes can create recessions that may take years to resolve. Economists have been sounding alarms of a stock market crash that could lead to a recession for a couple years now. What they’ve dreaded could be on the horizon. The Federal Reserve Bank of New York estimated that there’s around a 29% chance of a recession in the next 12 months.
Could the recession we’ve been fearing finally hit — heralded by a stock market crash? It’s quite possible. If it happens, Buffett won’t be caught off guard; he’s been readying for a market dip by selling stocks and building up epic cash reserves. If you want to know what moves to potentially make, here’s what he would likely do in the face of a stock market crash.
Buffett has always preached the importance of staying calm in economic chaos. It makes good sense. You wouldn’t want the captain of a ship going haywire when it gets stormy. And you’re the captain of your ship when it comes to your investments. Buffett didn’t freak out during any previous crashes, and he wouldn’t freak out ahead of or during another.
“If there were to be a market crash, Warren Buffett wouldn’t panic — he would go straight to work,” said Joseph Camberato, CEO at National Business Capital.
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Should the stock market crash, Buffett would see — and seize — an opportunity. He’d scoop up shares in high-value companies that he understands and believes in. These shares would likely be cheaper than they’d be during stronger economic times, so he’d be getting a bargain.
“He would grab his cash reserves and start buying quality companies at a discount,” Camberato said. “The goal wouldn’t be to pick up just anything that’s cheap, but to find businesses that are fundamentally strong, just temporarily pulled down by the market.”
It must be highlighted that Buffett’s strategy would be value-focused.
“He looks for companies that are solid and aren’t going anywhere, but are caught in the wave of a market downturn,” Camberato said.
This could turn into something of a “buying spree.”
“He and his lieutenants at Berkshire Hathaway would likely go on a buying spree following a stock market crash or significant correction,” said Robert Johnson, PhD, CFA, CAIA, chairman and CEO at Economic Index Associates. “Buffett has said, ‘Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.’”
Buffett certainly has the money to see through one heck of a stock shopping spree.
“As of Q3 2024, Berkshire Hathaway held a whopping $325.2 billion in cash and equivalents, up from $276.9 billion at the end of Q2 2024,” Johnson said.
Buffett may also seize another opportunity — one outside the realm of the average investor: negotiating private deals with behemoth corporations that need a lot of financial support.
“On the flip side, he might also target businesses in serious need of capital and negotiate private deals,” Camberato said. “He did that with Bank of America during the 2008 financial crisis. He structured a deal with warrants and options that gave him a massive return when the dust settled. He would probably also increase his stakes in companies he already knows and trusts.”
Buffett would seize yet another opportunity — in the acquisitions space.
“Given the size of Berkshire Hathaway, Buffett would seek large acquisitions — entire companies or large positions in publicly traded firms,” Johnson said. “He has the liquidity to make an enormous purchase if the opportunity arises. In the past, this would likely mean marketable securities purchases. But, given Berkshire’s massive size, the firm would likely focus on acquiring large, private companies or making large purchases of publicly traded equities.”
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