How will the economic policies of the Trump administration -- centered around tariffs, trade wars, and vast government spending cuts -- play out? That's anyone's guess. The only thing that's not uncertain is that economic uncertainty is poison for most businesses. The unpredictability surrounding tariffs, an unknown impact of government spending cuts as they ripple through the economy, and the effects of an aggressive immigration policy could potentially lead to an economic downturn.
While there are no truly safe stocks, some companies are poised to perform better than others during and after periods of economic uncertainty. For investors worried about the Trump economy, International Business Machines (IBM 2.71%) and Berkshire Hathaway (BRK.B 1.14%) are great long-term bets.
International Business Machines
Very few companies would be completely untouched by an escalating trade war and a potential recession. IBM will likely feel some pain as businesses pull back on IT spending in the face of growing uncertainty. However, demand could increase for tech projects that have a clear return on investment for clients in terms of cutting costs and boosting productivity.
NYSE: IBM
Key Data Points
Even before the Trump administration began, IBM was handling a mixed-demand environment. The company's clients have been pulling back on discretionary spending and deprioritizing non-critical projects, while boosting spending on transformation efforts and artificial intelligence (AI). Economic uncertainty in 2025 could supercharge those trends.
When cost-cutting becomes the priority for IBM's clients, the company's hybrid cloud and AI platforms, coupled with its consulting arm, offer attractive solutions. Moving from a legacy on-premises infrastructure to a hybrid cloud setup can deliver meaningful cost and productivity benefits, and tapping IBM's watsonx AI platform to deploy fine-tuned, specialized AI applications and agents can automate tasks and, ultimately, reduce spending.
IBM expects its revenue growth to accelerate to at least 5% in 2025, and free cash flow is expected to grow to $13.5 billion. A deteriorating economy could throw a wrench in that forecast, but IBM is still well-positioned to power through by helping clients weather the storm. IBM stock won't be immune from a broad sell-off, but the company itself should hold up better than many of its peers if economic conditions take a turn for the worse.
Berkshire Hathaway
There's no question that Warren Buffett's Berkshire Hathaway is exposed to the threat of trade wars and worsening economic conditions. The company owns a massive stock portfolio that will be hit hard by a stock market sell-off and operates businesses in a wide variety of industries, including railroads, energy, and consumer goods, which will suffer in a recession.
NYSE: BRK.B
Key Data Points
However, Berkshire also has a mountain of cash, and Buffett is legendary for having nerves of steel and finding incredible deals at times when others are running away. Multiple transactions he made during the financial crisis that threw lifelines to struggling companies, for example, paid off in the form of billions of dollars in gains. When the world was panicking, Buffett was making deals.
Berkshire ended 2024 with a whopping $334 billion in cash and short-term investments, like U.S. Treasury bills. This gives the company an incredible amount of resources to buy stocks that become attractively priced, acquire companies outright, or make other types of deals that ultimately enrich Berkshire shareholders. This cash also provides a huge buffer against deteriorating results for the company's businesses.
Many companies appear robust until a crisis hits, only to be revealed as fragile when things go sideways. Berkshire is "antifragile," a term coined by Nassim Taleb. The company is built to not only withstand extreme economic shocks, but also to grow stronger as it makes the types of investments that almost everyone else becomes afraid to make. No matter what happens during the Trump administration, Berkshire is almost certain to come out the other side a stronger company.
