The Fed Now Expects a Recession: 1 Warren Buffett ETF to Buy Hand Over Fist

The past year or so has been a roller coaster for investors. While the market has been rebounding recently from its 2022 plunge (with the S&P 500 up nearly 8% since the start of 2023), more experts predict that the U.S. is headed for a recession.

In fact, the members of the Federal Open Market Committee now believe we'll face a "mild recession" by the end of 2023. Their pessimism increased in part due to concerns surrounding the banking industry.

While that's a worrisome forecast in one sense, it's not all bad news. A bull market is still on the way (perhaps sooner than you think), and there's one Warren Buffett-approved ETF variety that's almost guaranteed to make you money -- even if that potential recession becomes a reality.

When will the next bull market begin?

This year's market rally has many investors feeling optimistic that we're seeing the light at the end of the tunnel, but it's still too soon to tell whether we're really in the early stages of a new bull market.

However, history shows that the U.S. stock market almost always recovers ahead of the economy. In nearly every recession over the past 50 years, the S&P 500 entered a new bull market before the economy reached its lowest point.

In other words, stock prices will likely begin their rebound even while the path ahead looks bleak for the economy -- as it does today. This, then, could be one of the best times to invest to ensure you're positioned to take advantage of the upcoming bull market. If you wait until the broader economy is once again gaining momentum, you're likely to miss out on the start of the stock market's recovery.

Buffett's top ETF recommendations

Buffett has seen his fair share of economic cycles, so when he makes an investment recommendation, it pays to listen. And one type of fund he has repeatedly touted is an S&P 500 ETF.

In fact, specimens of this variety are the only ETFs in his portfolio. Through the conglomerate he runs, Berkshire Hathaway, Buffett is invested in the Vanguard S&P 500 ETF (VOO -0.07%) and the SPDR S&P 500 ETF Trust (SPY -0.05%).

A decade ago, he also made headlines when he made a public bet that an S&P 500 fund would beat the results of a group of actively managed hedge funds over a decade. He easily won that bet: The S&P fund earned a return of around 126% over 10 years, while the five hedge funds averaged returns of just 36%.

An S&P 500 ETF is a fantastic choice for both keeping your principal safe and maximizing your earnings. This type of ETF tracks the S&P 500, meaning it holds the same stocks as the index itself and aims to mirror its returns.

While the broad-based S&P 500 will of course take hits during periods of volatility, history shows that there's never necessarily a bad time to invest in the index. Analysts at Crestmont Research examined the index's rolling 20-year total returns since 1900, and they found that in all 104 periods examined (from 1919 to 2022), the S&P 500 earned positive total returns.

This means that if you had invested in an S&P 500 ETF (or an equivalent portfolio of stocks, as ETFs didn't exist until 1993) at any time after 1900 and held it for 20 years, you'd have made money -- regardless of how severe the recessions or volatility were during that time.

Becoming a millionaire by buying the S&P 500

Historically, the S&P 500 has earned an average rate of return of around 10% per year, though there have of course been years of much steeper gains and painful losses along the way.

With enough time, you can earn a substantial return with an S&P 500 ETF.

For example, say you consistently invest $200 per month while earning a 10% average annual return. Here's approximately how much you could accumulate over time depending on how many years you were investing.

Source: Author's calculations via Investor.gov.

The sooner you get started investing, the easier it will be to make a lot of money in the stock market. Regardless of whether there's a recession on the horizon, you're better off beginning to invest now rather than putting it off.

There's a reason why S&P 500 ETFs are Buffett's most highly recommended fund type, and they are fantastic options for many investors. By investing now and riding out the volatility, you could put yourself on course for serious gains over time.