If a Stock Market Crash Is Coming, Warren Buffett Says This Is the Smartest Move Investors Can Make

The S&P 500 and Nasdaq are up 11% and 9% year to date, respectively, but Morgan Stanley strategist Mike Wilson says about 60% of U.S. stocks have fallen more than 20% since June, amid concerns about AI-boom durability, elevated bond yields, and rich valuations. The article cites average one-year returns after correction territory of 18% for the S&P 500 and 21% for the Nasdaq over the past decade. It presents Warren Buffett’s approach as buying competitively advantaged businesses at rational prices during drawdowns and holding them long term.

Analysis

The headline risk is not simply an index correction; it is a breadth-and-duration problem. If AI-related earnings expectations are concentrated while financing costs remain restrictive, weakness can migrate from speculative growth into suppliers and broad index leadership, compressing multiples before aggregate earnings estimates adjust. Conversely, the cited post-correction averages are poor timing signals: small samples, varying macro regimes, and survivorship can make a rebound look more reliable than it is. They support having liquidity and a buying plan, not buying indiscriminately.

Near term (days to weeks), crowded growth exposure and rate moves can amplify downside; over 1–3 months, watch earnings revisions and whether market breadth improves alongside any index rebound. Over 6–18 months, the key distinction is whether AI spending translates into durable customer returns or merely shifts capex among chip, cloud, and power infrastructure vendors. Berkshire Hathaway (BRK.A) may serve as a quality-oriented comparison, but its diversified businesses and market exposure mean it is not a clean crash hedge. The contrarian opportunity is to buy quality selectively after estimates stabilize—not to assume every 20% decline is a bargain.

Key Decisions for Investors

• Avoid an all-at-once index dip-buy based on historical averages. Scale into broad U.S. equity exposure in tranches only as breadth stabilizes; use SPY for broad-market exposure and QQQ only if willing to retain greater growth/AI concentration.
• For a relative-value expression, consider a modest long BRK.A versus short QQQ position as a hedge against further growth-multiple compression, not as a pure market-neutral trade. Reassess if Berkshire’s relative performance weakens while earnings breadth and AI-related guidance improve.
• Set alerts for the thesis: falling forward earnings estimates across sectors, renewed rises in Treasury yields, or continued deterioration in advance/decline breadth would argue against adding risk. Improving breadth and stable estimates would reduce the case for the hedge.
• Verify current valuation, earnings revisions, and Berkshire’s latest filing before sizing. The article supplies no current prices, consensus estimates, or company-level evidence that a specific stock is discounted; absent that evidence, keep dry powder rather than forcing a single-name purchase.