Latest news with #recession
Yahoo
3 hours ago
- Business
- Yahoo
Warren Buffett's 4 Time-Tested Methods for Surviving Economic Downturns
The chance of recession hitting the U.S. is 40%, according to a recent report from Preparing yourself and having a plan to get through a recession is crucial. Therefore, who better to look to than billionaire Warren Buffett? Warren Buffett: Check Out: The 'Oracle of Omaha' is known for his foresight, and has been a savvy investor for years in times of fortune and famine. His investments have consistently outpaced the S&P 500, according to Bloomberg. How is Buffett taking steps to steel himself and Berkshire Hathaway for the rough times ahead? Read on to find out. In a recent address to Berkshire Hathaway shareholders, Buffett said it's important not to let your inner feelings sway your investments. 'Check emotions at the door,' he said. Buffett went on to say that if every drop has you worried, investing might not be a good strategy for you to take on. 'If it makes a difference to you whether your stocks are down 15% or not, you need to get a somewhat different investment philosophy, because the world is not going to adapt to you. You're going to have to adapt to the world.' Read More: At 94 years old, Buffett has seen many economic slumps in this country. He said in terms of historical context, the stock market we saw earlier this year isn't particularly remarkable. In his stakeholder address, Buffett referenced the Dow Jones Industrial Average dropping 89% during the Great Depression. This drop was worse than what we've seen recently, however, and he warned that the future is what investors should be worried about. 'You will see a period in the next 20 years that will be a hair curler compared to anything you've seen before.' To protect yourself, Buffett recommended liquidating stocks now to have cash on hand before the market dips. Once it drops, he said to use the cash to buy stock and take advantage of the low prices. Buffett himself has been selling off stock recently, suggesting he's getting ready for a major economic downturn. According to Fast Company, Buffett said to invest in companies that you stand behind, not ones that you are following blindly. This way, you can make more informed decisions on how the company will do. Perhaps a company will actually offer consumers something recession-proof, or particularly valuable during a specific time (think Zoom during the pandemic). This helps ensure your portfolio doesn't become obsolete in times of economic hardship, and will thrive during better times. Investing is a marathon, not a sprint. Buffett's marathon has been long, and he's seen that behind every great downturn, the market does rebound. According to CNBC, after the market reaches a low, it's an average of two years before stocks break even again. More From GOBankingRates Mark Cuban Tells Americans To Stock Up on Consumables as Trump's Tariffs Hit -- Here's What To Buy This article originally appeared on Warren Buffett's 4 Time-Tested Methods for Surviving Economic Downturns Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
15 hours ago
- Business
- Yahoo
Large Banks Could Easily Weather a Massive Recession, Fed's Annual Stress Test Finds
The Federal Reserve's annual stress test found that large banks would remain resilient during an extreme recession. The annual stress test is designed to examine whether big banks could survive a hypothetical downturn without government assistance. The test results come as the central banks mulls over changes to the test that would make it more country's biggest banks can comfortably stay afloat if a severe recession hits due to their sizable cushions, the Federal Reserve said in its latest health check on the industry. The annual stress tests design a nasty scenario for the economy and examine whether big banks could survive it—without the need for government help, as in 2008. The latest results showed that banks such as JPMorgan Chase, Wells Fargo, Citigroup, and Bank of America could comfortably withstand those blows and keep lending to households and businesses. "Large banks remain well capitalized and resilient to a range of severe outcomes,' Fed Vice Chair for Supervision Michelle Bowman said in a press release. This year's scenario was a little easier than in 2024, but it featured a brutal recession nonetheless. The Fed tested banks' resilience under an unemployment rate that peaked at 10%, stock prices falling 50% and a roughly 30% drop in housing prices and commercial real estate values. That hypothetical recession would inflict losses of $550 billion on the 22 banks the Fed tested, as credit card users, businesses and other borrowers default on their loans. However, all those banks would maintain cushions far above the minimum levels the Fed requires. One key ratio the Fed uses to determine whether banks have enough capital would drop to 11.6% across the industry in its scenario, down from 13.4% at the end of 2024. But that is far above the minimum requirement of 4.5%. Other banks the Fed reviewed this year include lenders such as PNC Financial Services, Capital One Financial, U.S. Bancorp, M&T Bank and Truist Financial. The exams also include major Wall Street banks such as Goldman Sachs and Morgan Stanley, as well as the U.S. branches of several big foreign banks. The Financial Services Forum said in a statement the results 'confirm the strong capital positions of the largest U.S. banks,' which have stayed resilient in the annual tests after more than a decade. But Better Markets, an advocacy group that seeks stronger regulations, said that the tests' 100% track record shows they are 'stressless, ineffective and endanger all Americans' by improperly measuring banks' risks to a downturn. The results come as the Fed weighs a proposal to make banks' yearly results less volatile and other changes that are likely to be industry-friendly. Banks have long argued the Fed's process is opaque and subject to unpredictable results, making banks less able to lend. However, critics say some opaqueness is precisely the point—since it makes the tests rigorous and limits banks' ability to find workarounds. Trade groups sued the Fed in December over the issue, a battle that's since been paused now that the Fed is weighing changes to the annual exams. The Fed was partly hamstrung by a Supreme Court case last summer, which reined in federal regulatory agencies' power. On Friday, the Fed reiterated that it 'intends to improve the transparency of the stress test process' by disclosing models to determine banks' losses ahead of time. The agency says it would lead to valuable feedback that could improve whether the tests will adequately gauge risks. The regulator is also proposing to reduce year-to-year volatility of stress test results by averaging out outcomes over two years. Read the original article on Investopedia Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
16 hours ago
- Business
- Yahoo
How to play what this strategist calls a 'complacent' market
Sizemore Capital Management's chief investment officer, Charles Sizemore, joins Market Domination with Josh Lipton to share his hesitation with the current state of the market, what it means for investors, and some names he thinks are good picks. To watch more expert insights and analysis on the latest market action, check out more Market Domination here. I got green all over the place, Charles. All major averages in the green. Now we're grinding higher. That makes sense to you, Charles, uh, or no? Do you think we're being kind of complacent? Plenty of questions, of course, still out there, right? I mean, trade and tariffs, I just had a a smart economist on the show, Charles, told me there's a 50% chance we're going to trip into a recession. So what do you make of these market moves? Well, I think he's being conservative to say it's only a 50% chance of a recession. But yeah, this is a very complacent market. We went into this year with the market priced for absolute perfection. Of course, we didn't get perfection when we ended up with the trade war, a lot of volatility in the administration, and of course, Middle East war. Uh, all of that had the effect of knocking stock prices down for a bit, but now we're right back where we were in February, uh, you know, touching, touching new all-time highs here. That's a very aggressive market. You have the S&P priced at about 28 times earnings, which is a very expensive valuation under any, even the rosiest scenario. And measured by sales, it's trading at about three times sales, which puts it at one of the most expensive markets in history. So yeah, there's a lot of optimism built into this market. Is it too much? I guess we'll find out soon enough. But yeah, investors are really, they're expecting, they're pricing in really good things coming in the rest of the year. And and so Charles, evaluations may look a bit stretched according to some metrics. Um, you don't see as growing into that. You know, you what what do you see for corporate profit growth with earnings season, Q2 earning season coming up? That's going to be really tough because the the environment we're in right now, post-tariff, makes comps really, really difficult. So will earnings growth even be higher at all this year in a lot of sectors? I I really don't know. Like that is really, that that remains to be seen. But, you know, going, going forward, the the 28 times, the 28 times earnings is, of course, trailing earnings. The the metric does get a little bit better if you're assuming pretty robust earnings growth. I'm not so sure that's a realistic expectation, though. So Charles, so you sound cautious here. Against that backdrop, where do you want to be committing capital, Charles? How do you want to be positioned? Yeah, in a market like this, it probably doesn't make sense to put a lot of buy and hold capital at play. So you can really go about this two ways. You can focus more on short-term trades or you can focus more on income. And I think right now, with some of the yields we see in certain pockets of the market, taking an income approach makes makes a lot of sense. Business development companies are a fine example there. A lot of these are yielding in excess of 10%. Some of the more conservative ones are yielding 5 to 7. That's really competitive if you believe, as I do, that we're likely to be in a range-bound market for probably the rest of this year. Well, when you talk about these business development companies, these BDCs, Charles, what which ones make your radar? You know, given the the economic uncertainty, I think you do want to focus on the conservative names right now. I don't think you want to stretch and go for the super high yielders. Main Street Capital is probably the the highest quality blue chip in the group. It's, they have a very conservative dividend policy, which I like. They pay what I would call a sustainable monthly dividend, and then as earnings allow, they top that up with special dividends. So if you look at just their kind of conservative, monthly, regular dividend, it's yielding about five. You add in the the special dividends they've had over the last year, that pushes that yield to about seven. Now, that, the special dividends vary, of course, but a 5 to 7% yield with the with a very good possibility of of that dividend rising over the next year, and then every year beyond that is attractive. This is a company that has managed to maintain or raise its dividend through every economic setback we've had since 2008. That's attractive. Charles, appreciate your time and those picks. Thank you, sir. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Telegraph
16 hours ago
- Business
- Telegraph
Putin: I'm ready to scale back military spending
Vladimir Putin has announced plans to scale back military spending after Kremlin officials warned that Russia is 'on the brink of recession'. The Russian leader said he would reduce defence spending 'next year and the year after, over the next three-year period' at an economic summit of five post-Soviet states in Minsk on Friday. Responding to Nato's plans to raise defence spending to 5 per cent of GDP, Putin said the alliance's members would spend on 'purchases from the USA and on supporting their military-industrial complex'. 'So who is preparing for some kind of aggressive actions? Us or them?' he added. The comments came after Maxim Reshetnikov, the Russian minister of economic development, last week announced that the country is 'on the brink of going into a recession'. Elvira Nabiullina, the Russian Central Bank governor, also warned that the country's wartime economic momentum – driven by massive state defence sector spending – was grinding to a halt. 'We grew for two years at a fairly high pace because free resources were activated,' she said. 'We need to understand that many of those resources have truly been exhausted.' Russia's economy grew by 4.3 per cent in 2024, however, in an effort to kerb rampant inflation, interest rates were held at a staggering 21 per cent since October, before being cut marginally to 20 per cent this month as pressure eased slightly. Inflation has largely been driven by sanctions creating higher import costs. Wage growth has also soared to a 16-year high due to labour shortages caused by syphoning off workers into the defence sectors and the military. Moscow's Higher School of Economics estimated that there was a deficit of 2.6 million employees at the end of 2024. The Kremlin has also offered high wages and generous signing-on bonuses to soldiers in an effort to fill the ranks on the front line. Although the military-industrial complex has benefitted from increased state spending, private-sector industries have been impacted by lower demand, rising costs and large debt exposure due to sky-high interest rates. Russian banking officials have privately warned of a risk of a crisis over the coming year due to a growing number of businesses unable to make loan payments, Bloomberg News reported. Future costs could include that of reintegrating veterans of the war in Ukraine. Of the almost 140,000 Russian soldiers who have returned to civilian life, half reportedly remain unemployed. Putin, however, brushed off claims that the Russian economy was faltering at the St Petersburg International Economic Forum last week. He said: 'As far as the 'murder' of the Russian economy is concerned, as a famous writer once said – 'rumours of my death are greatly exaggerated'.'
Bloomberg
17 hours ago
- Business
- Bloomberg
Large Banks Pass Fed's Stress Test, Setting Stage for Payouts
By and Katanga Johnson Save A group of large US banks comfortably cleared the Federal Reserve 's annual stress test, setting the stage for lenders to boost buybacks and dividends for shareholders. The 22 banks subjected to this year's test all remained above minimum capital levels in a hypothetical recession. The lenders would withstand more than $550 billion in losses, with the results showing that 'large banks are well positioned to weather a severe recession,' the regulator said in a statement.
