Follow Buffett Amid Market Uncertainty: ETFs in Focus

U.S. stocks witnessed a bloodbath earlier this month following President Donald Trump’s announcement of sweeping 10% tariffs on all U.S. trading partners, with even steeper levies for countries running trade deficits with the United States. The news rattled investors, causing corrections and bear markets for key U.S. equity indexes.

Note that Trump’s latest tariffs push levies imposed on China this year to more than 100%, along with import taxes on roughly 60 trading partners that run trade surpluses with the United States. Asian countries are bearing the brunt of the measures.

Cambodia faced a 49% tariff, Thailand 36%, India 26% and Vietnam 46%. Imports from the European Union will be taxed at a 20% rate while Switzerland is facing a 31% rate. In response, China hit back with an 84% tariff on U.S. goods, intensifying the market carnage.

Against this backdrop, in a surprising development in the tariff saga, Trump announced on April 9 a temporary reduction in tariff rates for most countries to 10% for 90 days, triggering a historic surge across U.S. markets.

As a result, the S&P 500 surged over 9% on April 9, marking its third-largest single-day gain since World War II. The Dow posted its strongest percentage gain since March 2020, and the Nasdaq Composite experienced its best single-day performance since January 2001 — its second-best on record.

Market Uncertainty Remains

Despite the initial positive reaction, some analysts warn that the uncertainty is far from over. The outlook beyond the 90-day period is still unclear. If this was not enough, Jeffrey Roach, chief economist at LPL Financial, noted that volatility may persist due to economic reasons: 'Hard data from the early part of the year suggests the economy is slowing, irrespective of trade policy,' as quoted on CNBC.

According to Paul Ashworth, chief North America economist at Capital Economics, a complete rollback to pre-Inauguration Day tariff levels seems unlikely, as quoted on CNBC. Ashworth estimates that tariffs on Chinese goods may ultimately stabilize around 60%.

Fears of a Trade War and Rising Inflation

Economists and market watchers are increasingly concerned that these tariffs could trigger a global trade war, pushing up inflation and slowing economic growth. Capital Economics expects U.S. inflation to peak around 4% — double the Federal Reserve’s 2% target. The firm forecasts U.S. GDP growth to slow to between 1.0% and 1.5% annualized over the next four quarters, as quoted on CNBC.

Goldman Sachs estimates that foreign boycotts overall will slash the U.S. GDP by 0.1% to 0.3% this year, implying a hit of roughly $28 billion to $83 billion, as quoted on Yahoo Finance.

How Warren Buffett Can Help You Here?

Legendary investor Warren Buffett has long cautioned against panic during market downturns. In his 2017 letter to shareholders, he emphasized the unpredictability of markets, writing: “There is simply no telling how far stocks can fall in a short period.”

Interestingly, Buffett’s Berkshire Hathaway Inc Class B (BRK.B) is up 8.9% this year, going against the market carnage (as of April 8, 2025).

Corrections Are Common, Not Calamitous

While unsettling, market corrections like this one are relatively routine. According to Baird Private Wealth Management, there have been 21 drops of 10% or more in the S&P 500 since 1980 (as quoted on CNBC), with the average intra-year decline sitting around 14%.

In contrast to bear markets (which involve drops of 20% or more), corrections are typically shorter and less severe. Bear markets are painful, but historically they have not lasted more than a year.

Since 1942, bear markets averaged 11 months (per FT Portfolios). Past recessions too rarely exceeded a year. Thus, if you have a strong stomach for risks, you can try Zacks Rank #1 (Strong Buy) Vanguard S&P 500 ETF VOO (read: Should You Fear a Bear Market & Recession? ETFs in Focus).

Buffett Prefers Long View Approach

Buffett’s advice for individual investors remains clear: don’t panic. In downturns, stick with your long-term investment plan and continue investing regularly.

Buy When Others Are Fearful

Buffett views downturns as buying opportunities. When stocks fall, they’re essentially on sale — a chance for long-term investors to build wealth at a discount. Zacks Rank #1 (Strong Buy) Technology Select Sector SPDR ETF XLK can be a good bet now as the fund is heavily beaten down. The AI story is here to stay and Big Techs are bound to rebound, sooner or later.

However, XLK’s heavy exposure to Apple shares may be a drag. Apple has huge business ties with China. Donald Trump escalated the trade war with China, even as he reversed course on imposing steep new tariffs on most other trading partners. Unless Apple secures an exemption or a U.S.-China trade deal is reached, the near term could be tough for Apple.

Meanwhile, other high-potential tech ETFs like Global X Cybersecurity ETF BUG, SPDR S&P Kensho Future Security ETF FITE and Themes Cloud Computing ETF CLOD could be bought on the new-found optimism on the market.

Cash in King

Buffett’s Berkshire is cash-rich. Increasing stock sales and scaling back buybacks helped Berkshire nearly double its cash reserves in the first nine months of 2024, rising from $168 billion to a record $325 billion. Berkshire's cash pile made up a hefty 27% of its $1.15 trillion in assets at the end of September 2024.

This shows that cash is still king. Investors thus can play the cash-like ETF PIMCO Enhanced Short Maturity Active ETF MINT, which is off only 0.2% this year (as of April 8, 2025), while the ETF yields 5.14% annually.

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This article originally published on Zacks Investment Research (zacks.com).

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