The Bear Case: How CARR Behaves During Market Shocks
Holding equities means accepting volatility as the price of long-term compounding. Across the 6 major systemic shocks where Carrier Global (CARR) traded, the stock posted an average drawdown of -13%. For context, the S&P 500 averaged a -17% decline during those same periods.
If you are an investor in CARR stock, you might be asking: if the macroeconomic environment fractures, how far can this stock actually fall?
The answer depends entirely on the transmission mechanism of the crisis. Not all market shocks are created equal. To accurately price the risk, we have to isolate how CARR reacts to different types of systemic stress.
What Is The Stock’s Greatest Vulnerability?
When dissecting these past crashes by their root cause, a clear pattern emerges: CARR faces its most severe structural headwinds during ‘Rate & Valuation Shock’ environments. While broad market equities are affected by such environment, CARR has historically suffered outsized downside when this mechanism triggers. During these events, the stock has averaged a -24% decline.
To internalize the risk inherent in this stock, here is exactly how it behaved during its most severe tests across three distinct macroeconomic environments.
How Does It Handle A Rate & Valuation Shock Shock?
2022 Fed Tightening Inflation Bear Market (Jan 2022 to Oct 2022)
Post COVID stimulus combined with supply chain disruptions drove CPI to 9.1% by June 2022, the highest since 1981. The Fed, having misjudged inflation as transitory through 2021, was forced into the most aggressive tightening cycle since Volcker, hiking from 0% to 4.25% in nine months. Russia’s invasion of Ukraine in February 2022 further spiked energy and food prices globally.
The defining feature was that stocks and bonds fell simultaneously, eliminating the traditional 60/40 portfolio hedge. Rising rates compressed equity valuations while simultaneously crushing bond prices, with long duration assets such as tech, growth equities, and REITs suffering the most. The rate shock also exposed crypto and SPACs built on zero rate assumptions. The bear market ended when CPI began declining in October 2022, allowing markets to anticipate a Fed pivot.
CARR stock reaction vs other assets: The stock fell -35%, while the S&P declined -24% and bonds saw -35% move
What Happens During A Sovereign & Geopolitical Risk Scare?
2025 US Tariff Shock (Feb 2025 to Jun 2025)
The Trump administration announced sweeping Liberation Day tariffs on Apr 2, 2025, including 145% tariffs on Chinese imports and broad tariffs on allies. It was the most aggressive U.S. trade action since the Smoot Hawley era of the 1930s, representing a fundamental restructuring of global trade architecture that exceeded all prior market expectations.
The defining anomaly was the simultaneous fall in U.S. equities and the U.S. dollar. Historically, equity selloffs trigger safe haven dollar demand, so the dollar’s weakness alongside equities signaled that foreign investors were exiting U.S. assets entirely, suggesting a loss of confidence in U.S. economic governance. Supply chain disruption fears, retaliatory tariff escalation from China and the EU, and earnings estimate cuts drove the selloff. Small caps were hit disproportionately given their exposure to tariff driven input cost inflation with no pricing power offset.
CARR stock reaction vs other assets: The stock fell -16%, while the S&P declined -19% and bonds saw -3.8% move
Can It Survive A Credit & Liquidity Crises Crisis?
2023 SVB Regional Banking Crisis (Feb 2023 to Jul 2023)
Silicon Valley Bank had parked its deposits, swollen by the 2020 to 2021 tech funding boom, into long duration Treasuries and agency MBS. The 2022 rate surge destroyed the mark to market value of that portfolio. When SVB disclosed a $1.8B loss and a need to raise capital on Mar 8, 2023, a bank run ensued, accelerated by social media and the ability to wire deposits instantaneously. The FDIC seized SVB on Mar 10.
The run exposed a systemic vulnerability, as dozens of regional banks had made the same mistake, funding long duration assets with short duration uninsured deposits. Signature Bank failed two days later and First Republic failed in May. Unlike 2008, contagion was contained. The FDIC backstopped all deposits and the Fed launched the Bank Term Funding Program to provide emergency liquidity. Broader markets recovered quickly.
CARR stock reaction vs other assets: The stock fell -11%, while the S&P declined -6.7% and bonds saw -4.3% move
Past Market Shock Drawdowns Summarized For CARR
| Shock Event | S&P | Bonds | Sector | Stock |
|---|---|---|---|---|
| 2020 COVID-19 Crash | -34% | -0.7% | -42% | -3.8% |
| 2022 Fed Tightening Inflation Bear Market | -24% | -35% | -20% | -35% |
| 2023 SVB Regional Banking Crisis | -6.7% | -4.3% | -6.2% | -11% |
| Summer-Fall 2023 Five Percent Yield Shock | -9.5% | -17% | -12% | -14% |
| 2024 Yen Carry Trade Unwind | -7.8% | -1.2% | -1.1% | -0.8% |
| 2025 US Tariff Shock | -19% | -3.8% | -16% | -16% |
So What Can You Do For Your Investments?
Ultimately, surviving a market crash requires knowing what breaks your specific holdings. For CARR, the kryptonite is clearly Rate & Valuation Shock. By sizing your positions with these specific drawdowns in mind, you can remove emotion from the equation entirely.
Adoptin objective and rule-based portfolio management is the most effective way to protect capital when the macro environment inevitably fractures again. Trefis High Quality Portfolio is designed with such priciples in mind, and has returned > 105% since inception.