Is a Market Crash Coming? Warren Buffett’s Warning Is Ringing Loud and Clear.

Is a market crash coming? That’s the question on many investors’ minds today as the strong bull market continues. The S&P 500 (SNPINDEX: ^GSPC) has more than doubled over the past four years, and it’s up 12% year to date. Artificial intelligence (AI) euphoria is still driving the market, but there are signs that suggest a crash could be on the way.

Consider what Warren Buffett recently said about the state of the market today.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »

A stock market or a casino?

Warren Buffett is arguably the greatest investor of his generation. He recently stepped down as CEO of Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) after leading it for 60 years, during which time its stock gained 5,502,284%, vs. 39,054% for the S&P 500.

Warren Buffett.
Warren Buffett. Image source: Getty Images.

Buffett is a value investor, which means that he invests in undervalued stocks, or stocks trading beneath their intrinsic values. However, the most important thing he looks for in a stock is a great business. As he puts it, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Note the word fair, which suggests that the stock isn’t overpriced.

He has invested in all kinds of circumstances, including long bull markets, major crashes, high inflation, and just about everything else. Admirers look to him for guidance, and he gives advice freely.

What he said this past July should make every investor pay attention. In an interview with CNBC, he said, “It’s tough to find values when everybody is preferring gambling.” That was a follow-up to a remark he made in an interview in May, when he said, “I’ve compared the markets to a church with a casino attached.”

Should you invest now?

Warren Buffett would be the first person to admit he doesn’t know what’s coming next. But decades of experience give him an edge in understanding how the market works.

Since this bull market started four years ago, Buffett built up Berkshire Hathaway’s cash pile to its highest ever, nearly $400 billion. He was a net seller of stocks for many quarters while the market was rising and investors were pushing up some AI stocks to outrageous levels.

The entire time, Berkshire Hathaway found something to buy every quarter. However, when the market becomes very expensive and it seems people are gambling, it’s even more important to pay attention to valuation and look for market bargains.

A market crash might be around the corner, and investors should consider emulating Buffett by having cash ready and investing in fairly priced stocks.

Should you buy stock in S&P 500 Index right now?

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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

Is a Market Crash Coming? Warren Buffett’s Warning Is Ringing Loud and Clear. was originally published by The Motley Fool

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