Warren Buffett’s Investment Strategy Provides Signals
You don’t get the title the “Oracle of Omaha” easily. The word “oracle” is, of course, a reference to the soothsayers of ancient Greece, renowned for their supposed ability to predict the future.
Warren Buffett may not have any sort of magical powers in his favor, but years of successful plays on the stock market have made him one of the most well-respected stock investors alive. As such, it’s a good idea to take note of Warren Buffett’s investments and what they could mean for the average Joe trader.
Buffett has a number of basic rules and guidelines that instruct us on his particular brand of investing. But that’s not what I’m covering today. Instead, I’m looking at what he’s doing with his money right now, in order to help inform us about the stock market’s possible next moves.
Buffett’s current investment strategy seems to be warning us about a recession. Right now, the Oracle of Omaha is sitting on a big pile of cash and he’s not doing a whole lot of talking or investing. (Source: “Maybe Warren Buffett Is Warning Us About Something,” Bloomberg, August 26, 2019.)
What that means is the investor luminary is likely anticipating an economic downturn, as many indicators have pointed.
The best thing to do when you expect a downturn is to sit on your money and be prepared to pump it into the markets when prices hit their lows. That’s a classic strategy that usually leads to high returns on investments.
And a recession is looking more and more likely. There are a couple of key factors that are leading me to believe that an economic downturn could be on the horizon.
The first is that the bond yield curve has inverted. This very reliable predictor of past recessions has us anticipating a downturn at some point in the next six months to two years.
The second reason that a downturn is rather likely has to do with the U.S.-China trade war.
Whether valid or not, the trade war is going to hurt both the Chinese and American economies, with tariffs sending prices higher and making trade more difficult overall between the two major countries.
With the combination of the trade war and the inverted bond yield curve, we have a pretty potent recipe for a recession.
No one is right 100% of the time, and no predictor is ever 100% accurate. If things worked like that in the stock market, then, well, you wouldn’t need me or anyone else talking about how to invest your money.
It would instead be a simple equation. But markets are fluid and so are investment strategies. That’s why it pays to do your research and, more importantly, be wary of market signals.
Warren Buffett’s investments shouldn’t be the only thing you base your personal buys and sells on, but they should factor in at least a little bit. After all, the man is an investing legend and you could do a whole lot worse than emulate Buffett.
And right now, he’s telling us to sit tight and wait for a better time to invest, which is likely very near on the horizon.