Warren Buffett's Warning to Wall Street Just Got Distinctively Louder. Here's What to Do Next in the S&P 500 Correction.

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Adria Cimino, The Motley Fool

Sun, Mar 16, 2025, 3:10 PM 6 min read

Thanks to the billionaire's astoundingly beardown way record, investors look to Warren Buffett arsenic an illustration successful immoderate investing environment. As chairman, he's helped pb Berkshire Hathaway to a compounded yearly summation of astir 20% successful 59 years, compared to the compounded summation of astir 10% for the S&P 500. So, Buffett has intelligibly proven himself arsenic a apical investor.

And this is wherefore investors whitethorn perceive adjacent much intimately to what this concern elephantine has to accidental successful times of marketplace troubles. Buffett's informing to Wall Street began past twelvemonth arsenic helium reduced holdings of favored stocks Apple and Bank of America, closed retired positions successful index funds tracking the S&P 500, and built up a grounds level of cash. All of this signaled caution successful a bull marketplace that continued to roar higher.

In caller weeks, arsenic investors disquieted astir disappointing economical information and the interaction of President Donald Trump's tariffs connected the system and firm earnings, indexes mislaid their affirmative momentum. The Nasdaq and S&P 500 adjacent slipped into correction territory, dropping much than 10% from their astir caller peaks. Amid this turmoil, Buffett's informing to Wall Street grew distinctively louder. Let's see what Buffett had to accidental and what to bash adjacent during the marketplace correction.

Warren Buffett is seen astatine an event.

So, first, a spot of inheritance connected Buffett and his caller moves. The Oracle of Omaha is known for selecting prime stocks trading astatine tenable oregon adjacent bargain prices and holding connected to them for the agelong term. A classical illustration is Coca-Cola, a institution helium bought erstwhile it was trading for astir 15 times net successful the precocious 1980s -- and Buffett inactive holds this banal today.

The billionaire isn't swayed by trends and, therefore, doesn't caput going against the crowd. In fact, helium erstwhile wrote successful a shareholder missive that helium and his squad "attempt to beryllium fearful erstwhile others are greedy and to beryllium greedy lone erstwhile others are fearful." As I mentioned above, this has led to market-beating show implicit time.

In keeping with his contented of going against the crowd, arsenic stocks soared past year, Buffett was a nett seller -- with nett income totaling $134 billion. This helped Berkshire Hathaway assistance its currency presumption to much than $334 billion. Though Buffett hasn't explained his reasons for these moves, 1 large origin that could person spurred his actions is the inclination successful valuations, with stocks reaching historically costly levels.

The S&P 500 Shiller CAPE ratio (cyclically adjusted price-to-earnings ratio) reached beyond the level of 37, which it's reached lone doubly since the benchmark launched arsenic a 500-company index. This metric is peculiarly absorbing due to the fact that it measures terms and net per stock implicit a 10-year period, truthful it accounts for fluctuations successful the economy. Decidedly, stocks had go expensive, and it's apt the value-oriented Buffett considered this arsenic helium made concern decisions.