Buffet's Vanguard ETF, as per a prominent Wall Street analyst, exhibits potential for a significant drop.
Warren Buffet, the billionaire icon of investing, has been known to build his wealth by investing in individual businesses. However, sometimes he takes a different route by acquiring businesses outright or buying shares of other companies. A shift in strategy was evident in 2019 when Buffet included exchange-traded funds (ETFs) in Berkshire Hathaway's portfolio.
As of now, most of Berkshire's $300 billion-plus equity portfolio continues to be invested in individual stocks. But, two ETFs have managed to secure a spot within this portfolio. These ETFs aim to track the performance of the S&P 500 index. The two competitors are the SPDR S&P 500 ETF Trust (SPY) and the Vanguard S&P 500 ETF (VOO).
Buffett seems to favor VOO more than SPY as his investment data shows a slight preference for the Vanguard ETF. This preference was also highlighted in his 2013 letter to Berkshire Hathaway shareholders.[Enrichment Data: In his 2013 letter, Buffett praised Vanguard's low-cost index funds and highlighted that they outperformed actively managed funds over the long run.]
The woes for investors and Buffett may not end there. In October, Stifel's Chief Equity Strategist Barry Bannister warned of a potential 26% plunge in the S&P 500 index for the upcoming year. Bannister expressed concerns about market valuation and the overall macroeconomic picture.[Enrichment Data: Bannister's prediction is based on his Equity Risk Ratio (ERR) model, which has historically been an accurate indicator of market direction.]
Moreover, Morgan Stanley's Chief Global Economist Seth Carpenter expressed worries about President-elect Trump's proposed tariffs that could lead to a "big negative shock" for the U.S. economy.[Enrichment Data: Carpenter's concerns are grounded in the belief that tariffs lead to higher inflation and could pose threats to economic growth.]
With a mix of positive and negative predictions, does it mean the Dow Jones will plunge? It's a waiting game as the fate of these predictions remains to be seen. Buffett's favorite Vanguard S&P 500 ETF is expected to maintain its resilience in the long run, given the S&P 500's track record of delivering excellent returns over time.[Enrichment Data: The S&P 500's long-term average annual return is 10%.]
Despite the warnings of a potential market downturn, Buffet remains bullish on his preferred ETF, the Vanguard S&P 500 ETF (VOO), given its historical track record of delivering strong returns. Understanding the importance of finance in such volatile times, Buffet might consider allocating more funds towards investing in this ETF to secure his wealth.
