The conflict in Iran has rocked markets over the last month, with volatility spiking and oil prices surging with the closure of the Strait of Hormuz.
As of Tuesday night, investors were cheering as President Trump announced a two-week ceasefire with Iran under the condition that Iran reopen the Strait.
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The move could mean a lasting resolution to the conflict, but that’s still to be determined. Meanwhile, if the Strait reopens, there could be longer-term impacts on the energy market from the destruction of infrastructure in the region.
At times like these, it’s worth consulting the wisdom of Warren Buffett. While the Oracle of Omaha might not be the CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) anymore, at 95 years old, he probably has more accumulated investing experience and knowledge than anybody alive, and he’s certainly invested through more than a few market cycles.
Buffett sat for an interview on CNBC last week and expounded on a number of topics, including nuclear proliferation, Berkshire’s cash hoard, and the recent market sell-off.
Though Berkshire stock is down since the war broke out, Buffett’s company is well-positioned for such a crisis. It’s heavily invested in oil stocks like Chevron and Occidental Petroleum, and has a recession-resistant business model centered around insurance.
However, asked about the market sell-off, Buffett called it “nothing.” Since the war broke out, the S&P 500 hit a low point of 6316.91 on March 30, down 9.8% from its peak at the end of January. The broad-market index never officially entered a correction, defined as a decline of 10%-20%, which happens on averageevery one to two years.
In other words, the recent market dip probably wouldn’t even rank among the top 50 biggest market declines that Buffett has witnessed in his career.
Buffett’s investing style isn’t the right one for everyone. He’s a seasoned value investor and preaches patience, or being greedy when everyone is fearful. If you want to invest like Buffett, you’ll first want to assemble a diversified, recession-proof portfolio of dividend-paying stocks, and then hoard cash while you wait for attractive buying opportunities.
At this point, he doesn’t think the market pullback is deep enough to take advantage of, and that’s even more true following the stock market surge on the ceasefire announcement.
