If a Market Crash Is Coming, Here's the 1 Thing You Should Do, According to Warren Buffett
Key Points
There are indications that a market crash might be coming sooner rather than later.
Buffett always found stocks to buy as CEO of Berkshire Hathaway, even when he was a net seller.
Consistent investing leads to the best possible results.
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The short answer to the question of whether a market crash is coming is yes. It's a trick question and answer, of course, because there's bound to be a market crash at some point, but no one can tell you when that's going to be.
The reason it feels more urgent today is that there are indications that it's going to happen sooner rather than later. The CAPE ratio, a metric that measures the average price-to-earnings ratio for the S&P 500 (SNPINDEX: ^GSPC) and adjusts for inflation, is nearing a level it reached only one time before, precipitating a market crash. The Buffett indicator, which measures the total value of the stock market relative to U.S. gross domestic product, is at 210%, and values over 100% start to look expensive.
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Warren Buffett. Image source: The Motley Fool.
The underlying thread is that the market is expensive right now. An inflated market can be likened to a bubble, which might eventually burst; there's only so much air it can hold.
What should investors do? Look to Warren Buffett for the answer.
Through thick and thin
Warren Buffett built up Berkshire Hathaway's cash stores to their highest-ever levels while he was CEO and sold more stocks than he bought for several quarters before he stepped down at the end of 2025. However, there wasn't a single quarter when Berkshire Hathaway didn't find something to buy. That's significant because Buffett is a value investor who looks for undervalued stocks. The implication is that there's always something to find in the markets.
"Keep buying it through thick and thin, and especially through thin," he said in an interview in 2017.
Staying invested generates the best results. As investors have seen over the past few years, the market can remain elevated for a long time without declining, even when it looks expensive. It would be a shame to miss opportunities out of fear of a market crash, and you can't time the market.
A Charles Schwab study put market timing to the test and found that, given the impossibility of perfect market timing, consistent investing across all market conditions yielded the best results. It tested the theory across 80 different 20-year periods, and they all demonstrated the same outcome.
Another interesting corollary is that every type of investor, even those with poor timing, did fairly well. The only type who didn't was the non-investor, or the person who never got around to investing at all.
It's easy enough to see it in the growth of the S&P 500 over time. The index is up more than 250% over the past 10 years alone, including a major crash and a significant correction.
^SPX data by YCharts
Buffett's guidance is clear: Keep investing, but keep some cash ready to pounce when the market crashes.
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Charles Schwab is an advertising partner of Motley Fool Money. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Charles Schwab and recommends the following options: short September 2026 $95 calls on Charles Schwab. The Motley Fool has a disclosure policy.
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