Warren Buffett thinks market chaos is a gift for investors who keep their heads on straight

Warren Buffett told investors to stay calm during times of extreme market panic, and now, in the middle of one of the most chaotic periods in recent memory, his words are being tested again.

The advice first came during Berkshire Hathaway’s annual meeting back in 1997, when he brought up the meltdown of 1974, a year that saw the Dow Jones Industrial Average collapse by 52% from its 1972 high. That market crash came during a storm of rising inflation, a global oil crisis, and political chaos fueled by the Watergate scandal.

“The country didn’t disappear or anything,” Warren said at the time. “It’s just people behave in extreme ways in markets. And over time, that’s very good for people that keep their heads.”

Earlier this month, the S&P 500 briefly dropped over 20% from its February high, slipping into bear market territory before managing a slight bounce. The Dow dropped 1,500 points two days in a row, something that hasn’t happened since the index was first created in 1896.

Those dips didn’t spook Warren. The 94-year-old investor is almost certainly watching the downturn as a shopping opportunity.

His company, Berkshire Hathaway, is sitting on $334 billion in cash as of the end of 2024 — the most it has ever held — which now makes up 30% of total assets. With two weeks to go before his company’s next big shareholder meeting, many expect Warren to show where he might spend some of that pile.

Warren holds cash while others sell under pressure

Warren treats stocks like ownership in full businesses, not just numbers on a screen.

“The stock market is there to serve you, and not to instruct you. And that’s a key to owning a good business, and getting rid of the risk that would otherwise exist in the market,” Warren said.  “It doesn’t make any difference to us whether the volatility of the stock market averages a half a percent a day or a quarter percent a day or 5% a day. In fact, we’d make a lot more money if volatility was higher, because it would create more mistakes in the market.”

Those mistakes are already piling up on Wall Street. Two weeks after Trump’s April 2 tariff stunt, all major indexes finished another brutal week. Both the Dow and the Nasdaq Composite dropped over 2%, while the S&P 500 slid more than 1%. Markets were shut down on April 18 for Good Friday, but the mess stayed.

Jay Woods, chief global strategist at Freedom Capital Markets, said the worst-case tariff scenario is likely over.

“We know the worst case scenario with tariffs, and we know that they’re being negotiated,” Jay said. “So the impact that people were fearful of when we sold off — the worst case seems to be done.”

Jay added that what happens next depends on how deep the longer-term effects go. “Now we have to see where we land, and what kind of longer term impact it will have on the market, on the stocks that drive this market.” He said he’s watching the 5,130 level on the S&P 500, calling it a key Fibonacci retracement point. It could be a bottom, but he’s not sold yet. “I still think we have a lot of work to do to sound the all-clear signal, that’s for sure.”

While stocks churn, analysts are eyeing earnings. More than 120 S&P 500 companies are expected to report results next week. That includes big names like Alphabet and Tesla, part of the Magnificent Seven group of market movers. So far, 72% of companies that have reported beat Wall Street’s expectations.

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