Jul 13, 2023
According to the world’s most famous investor, the “incredible period” for the U.S. economy has been coming to an end in recent months. And even his own company, Berkshire Hathaway, isn’t immune.
“The majority of our businesses will report lower earnings this year than last year,” Warren Buffett cautioned at Berkshire’s annual meeting in early May.
Don't miss
- Commercial real estate has outperformed the S&P 500 over 25 years. Here's how to diversify your portfolio without the headache of being a landlord
- Blackrock’s CEO says art is a ‘serious asset class’ — here’s how you can own a piece of a Pablo Picasso
- Thanks to Jeff Bezos, you can now use $100 to cash in on prime real estate — without the headache of being a landlord. Here's how
That’s a somewhat surprising statement from a man who has famously been ultra-bullish on the U.S. economy.
Advertisement
But persistently high inflation, higher interest rates and the ongoing banking crisis have all made Buffett much more concerned about investment gains in the year ahead. His partner, Charlie Munger, echoed this sentiment. “Get used to making less,” Munger quipped.
The duo’s pessimism about the economy was also reflected in the company’s investment portfolio.
Berkshire Hathaway was a net seller of equities in the first quarter of 2023, pocketing $10.4 billion in stock sales after deducting purchases. The company’s cash hoard expanded from $128.6 billion at the end of last year to roughly $130.6 billion.
Investors should probably heed the Oracle of Omaha’s warning, but that doesn’t mean completely retreating from the market is the right strategy.
Instead, recession-resistant assets and international stocks could diversify a portfolio enough to withstand those downward forces.
Must Read
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
- Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Portfolio shockproofing
Some service sectors are relatively detached from the rest of the economy. Usually, these businesses are backed by a trove of hard, recession-resistant assets that retain their value through inflationary waves.
Caretrust REIT (CTRE) is a good example. The company owns and operates healthcare properties across the country. With over 21,795 hospital beds spread across 23 states and 204 properties, this real estate investment trust could serve as a loose proxy for America’s private health care industry.
Advertisement
The stock offers a 5.56% dividend yield and might be an ideal anchor for a portfolio during a recession.
Commercial real estate is another great option, with the category outperforming the S&P 500 over a 25-year period. And while it's traditionally been an investing opportunity exclusive to the ultra wealthy, new platforms make it possible for everyone to get in on the ground floor.
A single investment can give you access to institutional-quality properties leased by brands like CVS, Kroger and Walmart — and you'll even get to collect stable grocery store-anchored income each quarter.
Read more: 3 big mistakes people make with cash back credit cards that cost them every time they swipe
International stocks
According to a survey of economists conducted by Bloomberg, the odds of a U.S. recession in 2023 are as high as 65%. The risk is also high in other developed markets like Britain, France, New Zealand and Canada.
Advertisement
But developing markets are far less vulnerable to a recession. In fact, that same survey suggests India’s odds of a recession is 0%.
Put simply, investors could safeguard their wealth by investing in foreign stocks. India’s largest private bank, HDFC Bank, is listed on the New York Stock Exchange under the ticker HDB. The stock has delivered a total return of greater than 4,300% since it was listed in 2001 and held up better than most American banks during the 2008 financial crisis.
India isn’t the only option. American investors can bet on Chinese, Singaporean and Indonesian stocks via ETFs or American Depositary Receipts.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Cash
With Berkshire boasting a cash hoard of $130 billion at the end of Q1, it seems that Buffett’s favorite asset right now is U.S. treasury bills. The Oracle significantly boosted his treasury and cash equivalent holdings during the quarter.
That could be a savvy move for retail investors as well — as the interest rate on savings accounts rises.
You might even want to get creative with your cash holdings: Apple’s new high-yield savings account offers a juicy 4.15% annual percentage yield. The company claims that rate is 10 times higher than the national average. In fact, the yield is greater than the dividend yield on the S&P 500 or a five-year U.S. treasury bond.
There’s no other way to say it: cash is king in 2023.
You May Also Like
- Turning 50 with $0 saved for retirement? Most people don’t realize they’re actually just entering their prime earning decade. Here are 6 ways to catch up fast
- This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it. Which option would you pick?
- Warren Buffett used these 8 repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
- Here are 5 easy ways to own multiple properties like Bezos and Beyoncé. You can start with $10 (and no, you don’t have to manage a single thing)
Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
