Query: How would you react in the event you held American Express stock (NYSE: AXP) and its worth fell by 50% or extra within the coming months? Though this might sound a bit excessive, such an incidence has occurred earlier than and will repeat itself. American Specific inventory has been a comparatively weak performer this yr, with its inventory declining by 7% since early January, in comparison with the S&P 500, which has declined by 3% over the identical timeframe. Whereas the corporate posted a better-than-expected set of This fall 2024 outcomes, led by rising cost quantity and better payment associated revenues, there could possibly be a number of headwinds within the close to time period. The general market sentiment has been adverse amid rising issues a few U.S. recession following tariffs imposed by President Donald Trump on main buying and selling companions. This might have a major affect on American Specific, on condition that its enterprise is essentially tied to shopper spending and worldwide journey volumes.
Right here’s the purpose: The important thing takeaway is that in a downturn, American Specific inventory may incur significant losses. Knowledge from 2020 signifies that AXP inventory misplaced about 50% of its worth in just a few quarters whereas additionally seeing a peak-to-trough decline of about 32% through the 2022 inflation shock, faring a tad worse than the S&P 500. This raises the query: Might the inventory see a sell-off and attain as little as $135 (from the present $270) if an identical state of affairs had been to unfold? Naturally, particular person shares are typically extra unstable than diversified portfolios. Due to this fact, in case you are on the lookout for progress with lowered volatility, you may think about the High-Quality portfolio, which has outperformed the S&P 500 and generated returns of over 91% since its inception.
Why Is It Related Now?
President Donald Trump’s aggressive tariff measures – together with a 20% tariff on Chinese language imports and 25% on imports from Canada and Mexico, together with tighter immigration restrictions – have raised issues that inflation may return. All of this means that the U.S. financial system might encounter vital difficulties and even a recession – our analysis here on the macro picture. In truth, throughout an interview earlier this month, the President didn’t rule out the likelihood that new tariffs may set off a recession. When bearing in mind the heightened uncertainty from the Trump administration’s insurance policies, these dangers develop into particularly important. The continued Ukraine–Russia warfare and world commerce tensions additional obscure the financial outlook. Tariffs improve import prices, resulting in larger costs, lowered disposable earnings, and weaker shopper spending.
This might affect American Specific in a number of methods. Increased costs might lead customers to chop again on discretionary spending, doubtlessly reducing transaction volumes on the corporate’s community. If a recession follows, job losses and decrease incomes might additional weaken spending and cost volumes. Companies going through larger prices may also tighten their budgets, resulting in decrease company spending and fewer business-related transactions. American Specific is extra uncovered to the journey and leisure sector than its friends, a class that usually sees a sharper pullback throughout downturns. A lot of the corporate’s current progress has come from elevated spending by millennials and Gen Z in these areas. Within the vacation quarter, journey and leisure billings rose 11%, outpacing the 8% progress in items and providers.
How resilient is AXP inventory throughout a downturn?
AXP inventory has fared worse than the benchmark S&P 500 index throughout a few of the current downturns. Frightened in regards to the affect of a market crash on AXP inventory? Our dashboard How Low Can American Specific Inventory Go In A Market Crash? has an in depth evaluation of how the inventory carried out throughout and after earlier market crashes.
Inflation Shock (2022)
• AXP inventory fell 32.0% from a excessive of $198.38 on 16 February 2022 to $134.91 on 2 October 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The inventory absolutely recovered to its pre-Disaster peak by 26 January 2024
• Since then, the inventory has elevated to a excessive of $325.87 on 23 January 2025 and at present trades at round $270
Covid Pandemic (2020)
• AXP inventory fell 49.6% from a excessive of $136.93 on 19 February 2020 to $68.96 on 23 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The inventory absolutely recovered to its pre-Disaster peak by 23 February 2021
World Monetary Disaster (2008)
• AXP inventory fell 83.8% from a excessive of $63.23 on 14 October 2007 to $10.26 on 8 March 2009, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The inventory absolutely recovered to its pre-Disaster peak by 5 March 2013
Valuation
At its present worth of about $270 per share, AXP is buying and selling at roughly 18x consensus 2025 earnings, which looks as if a comparatively honest valuation. The corporate’s income progress, whereas good, shouldn’t be precisely stellar. Consensus initiatives income progress charges of about 8% annually over FY’25 and FY’26. The corporate’s extra prosperous buyer base ought to climate any financial downturns higher than different card gamers, however a downturn nonetheless stays a giant threat for the corporate given its heavy reliance on discretionary spending classes like journey and leisure, that are extra susceptible to financial slowdowns.. The corporate has additionally been spending extra on advertising and marketing lately. In 2024, advertising and marketing spending jumped 16% to about $6 billion, and if the pattern continues in an financial downturn, it might put strain on margins.
Given this potential slowdown in progress and the broader financial uncertainties, ask your self this query: Do you propose to carry on to your AXP inventory now, or will you panic and promote if it begins dropping to $135 and even decrease? Holding onto a declining inventory is rarely straightforward. Trefis collaborates with Empirical Asset Administration—a Boston space wealth supervisor—whose asset allocation methods yielded optimistic returns through the 2008-09 interval when the S&P misplaced greater than 40%. Empirical has included the Trefis HQ Portfolio into its asset allocation framework to offer purchasers with higher returns and fewer threat in comparison with the benchmark index—a much less turbulent journey, as proven in HQ Portfolio efficiency metrics.
| Returns | Mar 2025 MTD [1] |
2025 YTD [1] |
2017-25 Whole [2] |
| AXP Return | -8% | -7% | 318% |
| S&P 500 Return | -4% | -3% | 154% |
| Trefis Strengthened Worth Portfolio | -5% | -6% | 575% |
[1] Returns as of three/27/2025
[2] Cumulative whole returns for the reason that finish of 2016
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The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.
