If a Stock Market Crash Is Coming, Warren Buffett Says It’s the Smartest Move to Make Right Now
The stock market has undergone extraordinary developments in recent years. Since the bear market bottomed out on October 12, 2022, the S&P500 (SNPINDEX: ^GSPC) increased by 118% while the Nasdaq Composite (NASDAQINDEX: ^IXIC) soared 165%. THE Dow Jones Industrial Average (DJINDICES: ^DJI) has also grown at an impressive rate. This rally roughly began with the start of the generative artificial intelligence (AI) revolution following the public launch of ChatGPT in November 2022.
AI helped Nvidia has become the most valuable company in the world and generated hundreds of billions of dollars in spending on data centers, semiconductors and power infrastructure. Naturally, the excitement around AI creates uncomfortable comparisons to the dot-com bubble.
Did you miss Nvidia in 2009? This rare signal flashes again. In 2009, a “Double Down” signal sounded for a little-known chipmaker called Nvidia. For the first time in years, this same signal of “total conviction” rings out for a company a hundredth the size of Nvidia. Continue “
What if AI was a bubble and stocks crashed? Warren Buffett has spent nearly 60 years offering investors answers that seem almost too simple: The smartest thing you can do is stay invested despite volatility and uncertainty.
Warren Buffett doesn’t try to anticipate the markets
During an interview with CNBC in March 2009, Buffett admitted that he didn’t know where the stock market would bottom. More importantly, he said he has “no idea” what the stock market will do tomorrow, next week, next month or next year.
It’s a sobering admission from arguably the world’s most famous investor, but it explains the philosophy behind Berkshire Hathaway. Buffett never tried to predict whether stocks would rise by next Tuesday. Instead, he did his best to determine the value of a company and whether owning it at today’s price could produce attractive returns over many years.
Maybe AI stocks will crash in 2027. Or maybe they’ll rebound for another five years. Investors who sell everything because they are convinced a crash is imminent will find themselves faced with another problem: They will ultimately have to decide when to return. It’s hard to make one right decision at the right time, but it’s almost impossible to make both right decisions consistently.
The Internet crash is a valuable lesson
During the dot-com boom, the S&P500 peaked at 1,527 on March 24, 2000. By October 9, 2002, the index had fallen to 777, a sharp decline of about 49%. It only surpassed its old high on May 30, 2007. The duration of this rally is long enough to make buy-and-hold investing seem terrifying.
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