Query: How would you react if you happen to held Visa inventory (NYSE: V) and its worth fell by 35% or extra within the coming months? Though this might sound excessive, such an incidence has occurred earlier than and will very properly repeat itself. Visa inventory has been a blended performer of late. To make sure, Visa inventory has achieved properly this yr, rising by roughly 8% since early January, in comparison with the S&P 500 which has declined by 4% over the identical timeframe. Visa has benefited from stronger-than-expected Q1 FY’25 outcomes (Sept. yr), amid rising fee quantity in addition to greater cross-border volumes. Nonetheless, there might be a number of headwinds within the close to time period. The general market is present process a significant sell-off, spurred by growing issues a couple of U.S. recession following tariffs imposed by President Donald Trump on main buying and selling companions. This might have a major affect on Visa, provided 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, Visa inventory may incur significant losses. Information from 2020 signifies that V inventory misplaced about 35% of its worth in just a few quarters whereas additionally seeing a peak-to-trough decline of about 25% throughout 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 $220 if the same scenario have been to unfold? Naturally, particular person shares are typically extra risky than diversified portfolios. Due to this fact, in case you are on the lookout for development with decreased volatility, you may contemplate 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 important difficulties and even a recession – our analysis here on the macro picture. The truth is, final week, throughout an interview, the President didn’t rule out the chance that new tariffs may set off a recession. When considering the heightened uncertainty from the Trump administration’s insurance policies, these dangers turn into particularly important. The continuing Ukraine–Russia struggle and international commerce tensions additional obscure the financial outlook. Tariffs enhance import prices, resulting in greater costs, decreased disposable earnings, and weaker shopper spending.
This might affect Visa in a number of methods. Greater costs might lead customers to chop again on discretionary spending, probably reducing transaction volumes on Visa’s community. If a recession follows, job losses and decrease incomes might additional weaken spending and fee volumes. Companies dealing with greater prices may additionally tighten their budgets, resulting in decrease company spending and fewer business-related transactions. If financial uncertainty slows journey, Visa’s high-margin cross-border funds might also take a success. This might damage Visa’s revenues and margins.
How resilient is V inventory throughout a downturn?
Visa inventory has been extra resilient than the benchmark S&P 500 index throughout a number of the latest downturns. Whereas traders have their fingers crossed for a smooth touchdown by the U.S. financial system, how dangerous can issues get if there may be one other recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key shares fared throughout and after the final six market crashes.
Inflation Shock (2022)
• Visa inventory fell 24.5% from a excessive of $235.42 on 2 February 2022 to $177.65 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 30 June 2023
• Since then, the inventory has elevated to a excessive of $362.71 on 2 March 2025 and at present trades at round $340
Covid Pandemic (2020)
• Visa inventory fell 36.4% from a excessive of $213.31 on 19 February 2020 to $135.74 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 28 August 2020
International Monetary Disaster (2008)
• Visa inventory fell 52.1% from a excessive of $22.12 on 7 Might 2008 to $10.61 on 20 January 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 18 December 2009
Premium Valuation
At its present worth of about $340 per share, V is buying and selling at roughly 31x consensus 2025 earnings, which appears considerably costly. The corporate’s income development can also be not precisely stellar, with the consensus projecting development charges of about 10% every year over FY’25 and FY’26. Furthermore, Visa has additionally been within the crosshairs of antitrust authorities of late. Final yr, the U.S. Justice Division accused Visa of illegally working a monopoly within the debit market within the U.S. by unfairly suppressing competitors. This additionally poses a danger to Visa inventory.
Given this potential slowdown in development and the broader financial uncertainties, ask your self the query: do you plan to carry on to your Visa inventory now, or will you panic and promote if it begins dropping to $150, $125, and even decrease? Holding onto a declining inventory is rarely simple. Trefis collaborates with Empirical Asset Administration—a Boston space wealth supervisor—whose asset allocation methods yielded optimistic returns throughout 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 danger in comparison with the benchmark index—a much less turbulent trip, as proven in HQ Portfolio efficiency metrics.
| Returns | Mar 2025 MTD [1] |
2025 YTD [1] |
2017-25 Complete [2] |
| V Return | -6% | 8% | 362% |
| S&P 500 Return | -5% | -4% | 153% |
| Trefis Strengthened Worth Portfolio | -6% | -8% | 551% |
[1] Returns as of three/20/2025
[2] Cumulative complete returns because the finish of 2016
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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.
