“It’s difficult to make predictions, especially about the future.”
Whether this statement was first made by the Danish physicist Niels Bohr, as some think, or by someone else, it’s true. To be more accurate, it’s usually true about making accurate predictions.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
However, I believe I can make an accurate prediction about the future that isn’t very difficult. I don’t know whether or not former President Donald Trump will defeat Vice President Kamala Harris in the presidential race. I can predict with a high degree of confidence, though, how Warren Buffett will invest if Trump beats Harris.
Image source: The Motley Fool.
I’ll start by explaining what I believe Buffett won’t do if Trump wins the election. And it’s just as important as what he will do. I predict the legendary investor will not frantically sell any of the stocks in Berkshire Hathaway‘s portfolio.
Are there some stocks Berkshire owns that could be hurt by Trump’s proposed policies? Absolutely. Actually, I think there are quite a few in the group.
For example, the former president’s plans to impose steep tariffs on all imported products and super-high tariffs on goods imported from China could be very problematic to some companies. Apple, which ranks as the largest holding in Berkshire’s portfolio, comes to mind immediately. Most of the company’s products and the components for those products are made in China and other countries outside of the U.S.
It’s possible that nearly all of the stocks Buffett owns could be hurt by Trump’s proposed tariffs. Investment bank UBS projects that universal tariffs could cause the U.S. stock market to fall by roughly 10%. Few Buffett stocks would thrive in such an environment. But I don’t think he will aggressively sell a lot of stocks if Trump returns to the White House.
Now that we’ve looked at what Buffett won’t do if Trump wins, let’s examine how I think the Oracle of Omaha will invest in this scenario. I predict that he will do exactly as he has been doing recently.
Could he sell some stocks? Yep. He’s been a net seller of stocks for seven consecutive quarters. I suspect he’ll extend that streak if Trump beats Harris — and vice versa.
Buffett could also buy a few stocks, just as he has done this year. I wouldn’t be surprised if the winner of the presidential election factors into his decision-making to some extent. He buys stocks based on his estimation of their earnings prospects and their valuation relative to those prospects. Policies established by U.S. presidents can affect those earnings prospects. Buffett won’t ignore this possibility.
However, I don’t think for a second that he would invest in any stock solely because of who sits or will sit in the Oval Office. Corporate tax rates and federal regulations influenced by presidents are only part of the equation in estimating future earnings.
I also predict that Buffett will increase Berkshire’s cash stockpile. It doesn’t take a Nostradamus to make this prognostication. Berkshire’s cash and short-term investments have skyrocketed in recent quarters because Buffett can’t find enough stocks valued attractively enough to buy.
BRK.B Cash and Short Term Investments (Quarterly) Chart
I often write about the stocks Buffett has bought or sold in a given quarter. When I do, I usually include a disclaimer that says something to the effect that investors shouldn’t buy or sell those stocks only because the legendary investor did so. I stand by that view.
However, I think investors should seriously consider emulating Buffett’s general investment approach regardless of whether Trump or Harris emerges victorious. That doesn’t mean you have to be a net seller of stocks or hoard cash. It does mean, though, that you shouldn’t sell in panic because of which candidate wins. Being like Buffett also means that you should be highly selective about which stocks you buy, focusing on their earnings prospects and valuation.
Buffett has lived through 16 U.S. presidents. He’s been an investor during 15 different presidencies. And he has made a lot of money during Democratic and Republican administrations. I suspect he’ll continue to do so if Trump wins or if Harris wins. So can you.
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $22,292!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,169!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $407,758!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
See 3 “Double Down” stocks »
*Stock Advisor returns as of October 28, 2024
Keith Speights has positions in Apple and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.
Prediction: Here’s How Warren Buffett Will Invest If Donald Trump Beats Kamala Harris was originally published by The Motley Fool
Dena Holloway is a writer, editor, and content creator based in the United States. She has written for a variety of publications, including Men With Wings Press, where she covers arts, automotive, travel, and fashion. She's also a certified yoga instructor and works as a freelance copywriter.
