Question: How would you react if you held American Express stock (NYSE: AXP) and its value dropped by 50% or more in the near future? While this might seem dramatic, it’s not unprecedented and could occur again. American Express shares have underperformed so far this year, falling 7% since early January, compared to a 3% decline for the S&P 500 over the same period. Despite a stronger-than-expected Q4 2024 performance—driven by increased payment volumes and higher fee-related income—several challenges may lie ahead. Negative sentiment in the market has risen due to fears of a U.S. recession, spurred by tariffs introduced by President Donald Trump on key trade partners. This poses a risk to American Express, given its reliance on consumer spending and international travel trends.
Here’s the point: The key message is that in a downturn, American Express stock could suffer significant losses. In 2020, AXP stock lost nearly 50% of its value in just a few quarters and declined about 32% during the 2022 inflation crisis—slightly worse than the S&P 500. This raises the concern: could AXP fall to $135 from the current $270 if similar conditions arise? Naturally, individual stocks tend to be more volatile than diversified portfolios. So, if you’re aiming for growth with lower volatility, consider the High-Quality portfolio, which has outpaced the S&P 500 with a total return of over 91% since inception.
Why Is It Relevant Now?
President Donald Trump’s strict tariff policies—including a 20% tariff on Chinese goods and 25% on imports from Canada and Mexico, as well as tighter immigration rules—have sparked fears that inflation might return. This suggests the U.S. economy could face major challenges, including a possible recession—see our analysis here on the macro picture. In an interview earlier this month, the President even acknowledged that new tariffs could lead to a recession. Considering the increased uncertainty brought on by these policies, the risks become particularly concerning. In addition, the Ukraine–Russia war and ongoing trade disputes worldwide further cloud the economic horizon. Higher import costs caused by tariffs typically lead to increased prices, which reduce disposable income and dampen consumer spending.
This could negatively affect American Express in multiple ways. Rising prices may prompt consumers to reduce discretionary spending, which would hurt transaction volumes on the company’s network. If a recession follows, job losses and declining incomes could reduce spending and payment activity further. Businesses, facing higher expenses, may cut their budgets—resulting in lower corporate expenditures and fewer business-related transactions. American Express has a larger exposure to the travel and entertainment segments than its competitors, and these categories tend to see steeper declines during economic slowdowns. Much of the company’s recent growth has stemmed from increased spending by millennials and Gen Z in these areas. During the holiday quarter, travel and entertainment billings grew by 11%, outpacing the 8% increase seen in goods and services.
How resilient is AXP stock during a downturn?
AXP stock has underperformed the S&P 500 index during several recent downturns. Concerned about the impact of a market crash on AXP? Visit our dashboard How Low Can American Express Stock Go In A Market Crash? for an in-depth look at how the stock has behaved in past market crashes.
Inflation Shock (2022)
• AXP stock declined 32.0% from a peak of $198.38 on February 16, 2022, to $134.91 on October 2, 2022, compared to a 25.4% drop in the S&P 500
• The stock fully rebounded to its pre-crisis high by January 26, 2024
• It then climbed to $325.87 on January 23, 2025, and now trades around $270
Covid Pandemic (2020)
• AXP stock dropped 49.6% from $136.93 on February 19, 2020, to $68.96 on March 23, 2020, versus a 33.9% fall for the S&P 500
• It recovered fully to its pre-pandemic high by February 23, 2021
Global Financial Crisis (2008)
• AXP stock plunged 83.8% from $63.23 on October 14, 2007, to $10.26 on March 8, 2009, compared to a 56.8% decline in the S&P 500
• The stock fully recovered to its pre-crisis level by March 5, 2013
Valuation
At a current price of approximately $270 per share, AXP trades at about 18x expected 2025 earnings—a valuation that appears reasonable. Though the company is seeing steady revenue growth, it’s not spectacular. Analysts expect roughly 8% annual revenue growth for both FY’25 and FY’26. The company’s wealthier clientele may provide some cushion during economic slumps, but its strong reliance on discretionary sectors such as travel and entertainment exposes it to risk during downturns. Moreover, American Express has ramped up its marketing spend—jumping 16% in 2024 to roughly $6 billion—which could pressure margins further if the economy weakens.
Given the uncertain growth outlook and broader economic risks, ask yourself: Would you continue to hold AXP stock, or would you sell if it starts dropping toward $135 or below? Holding a falling stock is never easy. Trefis collaborates with Empirical Asset Management—a Boston-based wealth advisor—whose asset strategies delivered positive returns during 2008-09, when the S&P dropped more than 40%. Empirical includes the Trefis HQ Portfolio in its asset allocation model to help clients achieve better risk-adjusted returns—offering a smoother experience, as highlighted in the HQ Portfolio performance metrics.
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