President Donald Trump’s recent announcement of sweeping tariffs on goods from over 100 countries has raised anxieties about its potential toll on the broader U.S. economy and consumer spending. The situation is further complicated by China’s reciprocal tariffs, which are higher than anticipated and are escalating the ongoing trade war. Consequently, the the global markets are seeing a significant downturn today. The Hang Seng index is down 13%, the Nikkei down 8%, and European markets are also trading in negative territory.
Following a 10% decline in the past week, Meta’s (NASDAQ:META) stock continues to trend lower, reflecting broader market concerns. These concerns are amplified by the potential impact of upcoming tariffs on Meta. As selling products to the U.S. becomes more expensive due to tariffs, brands are likely to cut back on their marketing budgets, directly affecting Meta’s advertising revenue.
Meta’s stock is not immune to economic downturns and it could face substantial losses. Evidence from 2022 shows that Meta’s stock value decreased by over 75% within a few quarters. This begs the question: If a downturn similar to the one we saw in 2022 were to materialize, could META stock, which was around $740 in February, potentially plummet to below $200? Now, of course, individual stocks are more volatile than a portfolio — and in this environment, if you seek upside with less volatility than a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.
Why Is It Relevant Now?
Given the current economic landscape, the earlier concerns regarding the potential impact of tariffs on Meta are now particularly pertinent. The recently announced sweeping tariffs, coupled with the increasing likelihood of a widespread trade war involving key global partners, could significantly strain Meta’s business as advertisers potentially reduce their spending. This is especially relevant considering China’s substantial contribution to Meta’s revenue, generating approximately $18 billion, or 11% of its total (including revenue from ads shown outside the U.S. but attributable to Chinese entities). Furthermore, President Trump’s recent aggressive trade policies have reignited fears of inflation, which could further diminish consumer spending power and negatively affect companies like Meta. All of this means the U.S. economy could hit a rough spot, and even worse, hit a recession — our analysis here on the macro picture.
Given the elevated geopolitical uncertainty, partly fueled by potential policy shifts from the new Trump administration, several critical risks warrant attention. The ongoing war in Ukraine continues to contribute to global instability, and the landscape of international trade remains uncertain. Specifically, the implementation of tariffs can lead to increased import costs, which often translate into higher prices for consumers, reduced disposable income, and ultimately, weaker consumer spending.
How Resilient Is META Stock During A Downturn?
META stock has seen an impact that was worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• META stock fell 76.7% from a high of $382.18 on 7 September 2021 to $88.91 on 3 November 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 19 January 2024
• Since then, the stock has increased to a high of $736.67 on 17 February 2025 and currently trades at around $500
Covid Pandemic (2020)
• META stock fell 34.6% from a high of $223.23 on 29 January 2020 to $146.01 on 16 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 20 May 2020
Adding to these concerns, META stock currently appears relatively expensive, trading at 8.9 times trailing revenues, vs. a figure of 3.2 for the S&P 500. Given this valuation and the broader economic uncertainties, ask yourself the questions: Do you want to hold on to your META stock now? Will you panic and sell if it starts dropping to $300, $200, or even lower levels?
Holding on to a falling stock is never easy. Trefis works with Empirical Asset Management — a Boston area wealth manager — whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has incorporated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
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