Before the Berkshire Hathaway shareholders’ annual meeting on March 3, 2025, in Omaha, Nebraska, Warren Buffett takes the floor and meets with them.
David Allen Grogan After President Donald Trump announced sweeping tariffs of 10% on all U.S. trading partners and higher levies on countries with which the U.S. has a trade deficit the day before, stock prices plunged sharply on Thursday. The S&P 500, a proxy for the entire U.S. stock market, has now fallen more than 11% from its record high in February, placing it in correction territory—a drop of 10% or more from recent highs—with Thursday’s decline. Investors and economists alike fear that
Trump’s tariff policies could ignite a trade war with the nation’s trading partners and push inflation higher, two factors that could push the U.S. toward an economic slowdown. Markets may sell off quickly if a recession is imminent. Just ask Berkshire Hathaway chairman and investing legend Warren Buffett. In his 2017 letter to shareholders, he stated, “There is simply no telling how far stocks can fall in a short period of time.” He continued, “heed these lines” from Rudyard Kipling’s classic poem “If,” written in the year 1895, in the event of a significant decline. “If you can maintain your composure when everyone around you is losing theirs…
If you can wait without getting tired while you wait… If you can think — and not make thoughts your aim … When all men doubt you, you can trust yourself…
The Earth and everything on it is yours. Why it pays to keep your cool It is important to note that Buffett was writing about major stock market declines, such as the bear market that lasted from 2007 to 2009, when the S&P 500 lost more than 50% of its value. Those are much less common than what happens now. In point of fact, stock market corrections are fairly typical. According to Baird Private Wealth Management, the S&P 500 has experienced 21 declines of ten percent or more since 1980, with an average intra-year drawdown of fourteen percent.
Naturally, investors frequently do not know if circumstances will deteriorate before they do. Buffett wrote in 2017: “No one can tell you when these will happen.” “The light can at any time go from green to red without pausing at yellow.” The light can change from green to red at any time without stopping at yellow. Buffett, Warren But whether a decline is modest and short-lived or seemingly long and painful, the message to individual investors is the same: Stick to your long-term plans and continue investing. According to Buffett, downturns are “extraordinary opportunities.” Why? Because, historically, it’s never been all that long before the market resumes its upward trajectory. Since 1928, the average bear market — defined by a decline of 20% or more from recent highs — has lasted less than 10 months, according to data from Hartford Funds. That is practically no time at all in relation to the many decades you probably intend to invest. And keep your eyes on the prize—your long-term objectives—even though going through it can be scary.
You can effectively buy stocks at a discount by continuing to invest consistently as the market declines. As stock prices continue to fall, you will get a better deal as long as you invest in a well-diversified manner. As Kipling says, keep your head, ignore breathless headlines and keep doing your thing. Will the Earth and everything in it be yours? Maybe not — but you’ll likely do a good job of boosting your long-term wealth. The whole attitude reminds me of another quote from Buffett, this time from a letter to shareholders he wrote in 2009, where he said, “Big opportunities come infrequently” about taking advantage of investments with low prices. Reach for a bucket rather than a thimble when it rains gold.
