Berkshire Hathaway's Buffett Predicts Long-Term Market Growth Despite Short-Term Volatility

Warren Buffett, the CEO of Berkshire Hathaway, expressed optimism about the long-term outlook during the company's 2025 annual shareholder meeting. He acknowledged that short-term market fluctuations would continue to be unpredictable and could disrupt investors. "The long-term trend is upward," Buffett stated during the meeting. He emphasized that while no one knows what the market will do tomorrow, next week, or next month, people often spend too much time discussing these short-term movements, which he deemed valueless.

Buffett's comments came in response to a shareholder's question about Berkshire's substantial cash reserves, which had increased to $347 billion in the first quarter. He reiterated his stance from the annual letter, stating that he was not keen on holding such a large amount of cash. However, he clarified that holding cash was wiser than making hasty acquisitions. "We would prefer to be in a situation where we hold around $50 billion in cash," he said. "But business development doesn't always go as planned."

Buffett explained that making investments solely to reduce cash reserves to $50 billion by acquiring companies or buying stocks would be "the stupidest thing in the world." He believes it is better to retain cash reserves to seize opportunities that offer better risk-return advantages when Berkshire receives numerous acquisition proposals. "We have made a lot of money by not always being fully invested," he said.

This strategy, however, may not be suitable for everyone. Buffett and Berkshire's business model involves acquiring companies and selecting stocks. Historically, Buffett has advised most people to invest in passively managed S&P 500 index funds. "We think it is perfectly fine for passive investors to make a few simple investments and hold them for life," he said. "But we have chosen to be in this business. So we think we can do better than that."

Buffett downplayed recent market volatility, warning that "shocking" events could occur. A shareholder specifically asked about the market fluctuations over the past month. "What has happened in the past 30 days, 45 days, 100 days... is not that significant," he said. "This is not a major fluctuation... it is not a severe bear market or anything like that." He acknowledged that short-term losses are a reality in the stock market. "If a 15% drop in your stock is important to you, then you need to change your investment mindset," Buffett advised. "The world will not adapt to you. You must adapt to the world."

Buffett warned that just because he considered recent market volatility insignificant did not mean more dramatic declines would not occur in the future. He predicted that "shocking" events would happen within the next 20 years. "The world will make extremely serious mistakes, and unexpected situations will arise dramatically," he said. "The more complex the financial system, the more likely unexpected situations will occur without warning. This is part of the stock market. If you have the right investment mindset, this is a good place to invest your energy; but if you are afraid of market declines and excited by market rises, this is a bad place to invest. I am not trying to criticize anyone. Everyone has emotions. But when you invest, you must set your emotions aside."

During the five-hour Q&A session, Buffett covered a wide range of topics, including his views on protectionist trade policies and his pessimistic outlook on the U.S. economy. However, the major news from this year's shareholder meeting was Buffett's announcement that he plans to step down as CEO to allow Vice Chairman Greg Abel to take over. "I think it is time for Greg to become the company's CEO by the end of the year," Buffett said. While Buffett's era at Berkshire may be coming to an end, his timeless investment wisdom will undoubtedly endure.