The “incredible period” of growth for the American economy appears to be winding down, he said during Berkshire Hathaway’s annual meeting, adding the majority of the company’s businesses will probably report lower earnings this year compared to last year.
Buffett’s cautious remarks are a sharp contrast to his generally upbeat assessment of the US economy. What has changed, then? Buffett and his longstanding business colleague Charlie Munger are less optimistic about the prospects for investment returns in the upcoming year as a result of stubbornly high inflation, rising interest rates, and a prolonged financial crisis. “Get used to making less,” Munger said.
Despite their pessimism, Buffett and Munger do not support a total withdrawal from the market. Instead, they offer a few tips for investors who want to navigate the rapidly changing economic environment.
Some service industries are still comparatively sheltered from broader economic turmoil. These sectors are often backed by an abundance of real, recession-proof assets that hold their value even when prices are rising.
A potential buffer against economic downturns, for instance, is provided by Caretrust REIT (CTRE), a real estate investment trust that owns and manages healthcare assets all throughout the United States. With 204 sites and more than 21,795 hospital beds spread across 23 states, Caretrust acts as a loose representation of the private healthcare sector in the United States. Additionally, the stock now has a dividend yield of 5.56%, making it a compelling choice for investors looking for stability during a downturn.
Historically, commercial real estate has provided strong returns, outperforming the S&P 500 over a 25-year period. New platforms are democratising access to commercial real estate opportunities, despite the fact that this investment sector has historically been reserved for the extremely wealthy. Investors in this asset class can obtain exposure to properties of an institutional calibre that are leased by well-known companies like CVS, Kroger, and Walmart and benefit from consistent, grocery store-anchored revenue on a quarterly basis.
Investors may want to think about diversifying their portfolios with international stocks as the possibility of a U.S. recession in 2023 rises. Developing markets are typically less sensitive to a recession than developed markets like the United States, Britain, France, New Zealand, and Canada. For instance, a recent survey of analysts by Bloomberg revealed that India’s chances of entering a recession in 2023 are essentially zero.
ETFs and American Depositary Receipts are only two of the many ways that investors can access international markets. The largest private bank in India, HDFC Bank, is traded on the New York Stock Exchange under the symbol HDB. The company has generated a cumulative return of nearly 4,300% since it was listed in 2001, and it has shown resilient during the 2008 financial crisis.
Given Berkshire Hathaway’s impressive cash balance of $130 billion at the end of the first quarter, it is clear that Buffett now favours U.S. government bills as an investment. In light of rising interest rates, retail investors may also be wise to keep a robust cash position.
Innovative financial management techniques, like Apple’s brand-new high-return savings account, provide an alluring yearly percentage interest of 4.15%. This rate apparently exceeds the S&P 500’s dividend yield and even a five-year US Treasury bond, and is ten times greater than the national average.