Investors often look to Warren Buffett during times of trouble because the billionaire has been through just about every market environment imaginable. And during the ups and downs, he's persisted, standing by his pledge to buy shares of quality companies for reasonable prices and hold on for the long term. This has been a winning strategy, helping Buffett, at the head of Berkshire Hathaway, deliver market-beating gains over 59 years.
Right now -- as stocks tumble thanks to concerns about President Donald Trump's tariffs on imports -- seems like an appropriate time to consider Buffett's words. Trump this week set out new details of his plan to tax imports, launching a 10% tariff on all imports into the U.S. as well as a range of tariff levels by country -- with the heaviest levy of 54% on imports from China. Investors are concerned this will hurt both corporate earnings and the general economy at home, and possibly result in a recession.
In fact, even Buffett has criticized the idea of import tariffs, recently saying during a CBS News interview that they are "an act of war, to some degree. ... Over time, they are a tax on goods. ... You always have to ask that question in economics. You always say, 'And then what'?"
Does this mean the Oracle of Omaha, as he's often called, advises staying away from stocks these days? His words on investing during times of market turmoil offer an extremely precise answer.
Image source: The Motley Fool.
Trump's tariffs and stock market declines
But first, let's look at a quick summary of President Trump's moves and stock market performance so far. Trump initially spoke of tariffs on imports from China, Canada, and Mexico to protest the circulation of lethal drugs across borders. He implemented certain levies, then spoke of broadening tariffs to other countries -- particularly those with import tariffs on U.S. goods. This week, Trump announced these "reciprocal tariffs" at different rates for different countries as well as other tariffs.
As the tariff situation unfolded through much of last month, indexes declined. In fact, the S&P 500 and Nasdaq Composite both slipped in and out of correction territory and posted their worst quarterly performance since 2022. Investors, worried about the impact of Trump's strategy, turned away from stocks, especially those most sensitive to the economy.
Now, let's consider Buffett's very clear message regarding investing in times of turmoil, and for this, I'll refer to an op-ed he wrote in The New York Times back in 2008, during the global financial crisis. This was a time when a lot was going wrong -- from the collapse of investment bank Bear Stearns to the early days of the subprime mortgage crisis, and finally, a stock market crash.
The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. ...
So ... I've been buying American stocks.
Fears that "make no sense"
Buffett went on to say that while it's logical to question certain companies -- those with weak competitive positions, for example -- times of trouble actually are the perfect time to invest in top quality players. "Fears regarding the long-term prosperity of the nation's many sound companies make no sense," he wrote. Though earnings may suffer to a certain degree in the near term, years down the road these companies' earnings will go on to beat records, he added.
Buffett was right. The stock market and companies across industries recovered and generated growth over the long term. And Buffett, by investing when times were tough, picked up shares of these players at interesting or even dirt cheap prices.
Over the years, Buffett has reiterated his beliefs in the strength of American companies and the idea of getting in on stocks when they're going down -- and of course, holding on for a number of years to benefit. And time and time again, the billionaire's words and strategy haven't led investors who follow him astray.
Should you follow Buffett?
So, as Trump's tariffs roil the market and threaten to hurt companies' earnings and the general economy, should we once again follow Buffett's tried-and-true (at least until this point) advice? I'm in favor of it. Though the current situation represents a challenge, many strong companies have handled others and will take the steps needed to limit the negative impact this time around, too. It's also possible the Trump administration will negotiate with other countries at some point to loosen restrictions.
All of this means that, yes, it's important to be cautious during times of trouble, but this doesn't mean you should avoid investing. Like Buffett, take this opportunity to buy shares of the strongest of companies at bargain prices. And, also like this famous investor, you may set yourself up for a spectacular win over the long term.
