Sage of Omaha is upbeat on US economy forecast

While all around may be losing their heads, Warren Buffett kept his, declaring emphatically that the chances of a double-dip recession in the US, the world's largest economy, were "very low".

The 81-year-old investment guru, pictured, was all smiles and optimism in a speech to the Economics Club of Washington, and his relatively sunny outlook for the world's largest economy seemed to touch a chord because the Dow Jones Industrial Average rebounded strongly yesterday as investors switched money out of safe-haven assets such as US government bonds.

Investors had entered a defensive crouch last week amid disappointing numbers on monthly job growth in the US and the ebbing of confidence in the eurozone, but buying Treasuries was not going to reap rewards over the long term, Mr Buffett said. "The average person who just consistently buys equities – which to me are by far the most attractive investment choice around – at the end of 20 or 30 years, they'll do very well," he said.

The US will escape a recession "unless events in Europe develop in some way that spills over here big-time," Mr Buffett said, and although he reeled off a list of challenges facing the US – from a looming fight on Capitol Hill over expiring tax cuts, to the ever-rising national debt – he said that economic challenges had been overcome before and could be again.

"We're not smarter than the people in 1930, we don't worker harder than the people in 1930, we just have a system that works and has been working since 1776 and will keep working."

Mr Buffett is the second-richest man in the US, after Microsoft's Bill Gates, having built his company, Berkshire Hathaway, into a giant conglomerate spanning insurance, railways, utilities and – recently – local newspapers. His homespun wisdom is sought so often that he has become known as the Sage of Omaha, where he still lives.