How Low Can GE Really Go In A Market Crash?
To accurately assess risk, investors must look at how an asset behaves when the system breaks. In the 15 major market dislocations since it began trading, GE Aerospace (GE) has averaged a -22% contraction, compared to the S&P 500’s -16% drop.
If you are an investor in GE 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 GE reacts to different types of systemic stress.
What Is The Stock’s Greatest Vulnerability?
Not all macro shocks impact this stock equally. The historical data indicates that GE’s absolute worst-case scenarios are triggered by ‘Growth & Demand Scare’. While broad market equities are affected by such an environment, GE has historically suffered an outsized downside when this mechanism triggers. During these events, the stock has declined 36% on average.
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 Growth & Demand Scare Shock?
2020 COVID-19 Crash (Feb 2020 to Apr 2020)
- A novel coronavirus triggered pandemic fears. Italy’s healthcare collapse and a March 2020 Saudi-Russia oil price war signaled uncontainable disruption.
- Governments shut economies, triggering the fastest bear market in history. Unlimited QE and $2.2T fiscal stimulus drove a V-shaped recovery following vaccine development.
GE stock reaction vs. other assets: The stock’s drawdown stood at -51%, while that for S&P was -34% and for bonds was -0.7%.
What Happens During A Credit & Liquidity Crises Event?
2008-2009 Global Financial Crisis (Dec 2007 to Mar 2009)
- Excess housing leverage unwound, triggered by Lehman Brothers’ September 15, 2008 bankruptcy. No bailout froze global financial plumbing overnight, shattering assumptions of institutional rescue.
- Commercial paper collapsed and money markets broke the buck. Banks stopped lending as unemployment hit 10%. Oil crashed to $35/bbl on evaporating demand.
GE stock reaction vs. other assets: The stock’s drawdown was -81%, the S&P’s was -53% while for bonds it was None.
Can It Survive A Sovereign & Geopolitical Risk Shock?
2010 Eurozone Sovereign Debt Crisis / Flash Crash (Apr 2010 to Aug 2010)
- Greece revealed a 13.6% GDP deficit. Late April 2010 junk downgrades exposed the lack of fiscal union or a lender of last resort.
- European banks collapsed and the May 6 Flash Crash amplified fear. A $110B Greek bailout failed to convince markets peripheral sovereign bonds were risk-free.
GE stock reaction vs. other assets: The stock’s drawdown was -28% drawdown compares with a figure of -15% for the S&P and None for bonds.
Past Market Shock Drawdowns Summarized For GE
| Shock Event | S&P | Bonds | Sector | Stock |
|---|---|---|---|---|
| Summer 2007 Credit Crunch | -8.6% | None | -7.0% | -5.4% |
| 2008-2009 Global Financial Crisis | -53% | None | -60% | -81% |
| 2010 Eurozone Sovereign Debt Crisis / Flash Crash | -15% | None | -18% | -28% |
| 2011 US Debt Ceiling Crisis & European Contagion | -18% | -1.1% | -22% | -22% |
| 2013 Taper Tantrum | -0.2% | -17% | None | None |
| 2014-2016 Oil Price Collapse | -6.8% | -5.0% | -8.3% | -7.6% |
| 2015-2016 China Devaluation / Global Growth Scare | -12% | -4.4% | -11% | -11% |
| 2016-2017 Trump Reflation Bond Selloff | -3.7% | -15% | -3.3% | -7.1% |
| Q4 2018 Fed Policy Error / Growth Scare | -19% | -2.2% | -24% | -46% |
| 2020 COVID-19 Crash | -34% | -0.7% | -42% | -51% |
| 2022 Fed Tightening Inflation Bear Market | -24% | -35% | -20% | -36% |
| 2023 SVB Regional Banking Crisis | -6.7% | -4.3% | -6.2% | -0.5% |
| Summer-Fall 2023 Five Percent Yield Shock | -9.5% | -17% | -12% | -9.4% |
| 2024 Yen Carry Trade Unwind | -7.8% | -1.2% | -1.1% | -5.3% |
| 2025 US Tariff Shock | -19% | -3.8% | -16% | -21% |
[1] Summer 2007 Credit Crunch: Subprime hedge fund failures froze interbank lending, prompting an emergency Fed rate cut.
[2] 2008-2009 Global Financial Crisis: Lehman’s collapse froze global credit, crashing every asset class and spiking unemployment.
[3] 2010 Eurozone Sovereign Debt Crisis / Flash Crash: Greece’s deficit revelation collapsed European banks and triggered the May Flash Crash.
[4] 2011 US Debt Ceiling Crisis & European Contagion: US credit downgrade and European sovereign stress triggered a broad risk-off selloff.
[5] 2013 Taper Tantrum: Bernanke’s taper hint spiked Treasury yields, triggering emerging market capital flight.
[6] 2014-2016 Oil Price Collapse: OPEC refused to cut output, crashing crude from $100 to $26.
[7] 2015-2016 China Devaluation / Global Growth Scare: Yuan devaluation sparked global recession fears, crushing cyclicals and emerging markets.
[8] 2016-2017 Trump Reflation Bond Selloff: Trump’s election spurred fiscal stimulus hopes, rotating capital from bonds into cyclicals.
[9] Q4 2018 Fed Policy Error / Growth Scare: Powell’s hawkish comments and trade war fears triggered the worst December since 1931.
[10] 2020 COVID-19 Crash: Pandemic lockdowns caused history’s fastest bear market before massive stimulus drove recovery.
[11] 2022 Fed Tightening Inflation Bear Market: 9.1% CPI forced aggressive rate hikes, crushing both stocks and bonds simultaneously.
[12] 2023 SVB Regional Banking Crisis: SVB’s rate-driven bond losses triggered a social-media bank run, seized by FDIC.
[13] Summer-Fall 2023 Five Percent Yield Shock: Strong economic data pushed 10-year yields to 5%, compressing yield-sensitive sector valuations.
[14] 2024 Yen Carry Trade Unwind: BOJ rate hike unwound yen carry trades, briefly crashing tech stocks globally.
[15] 2025 US Tariff Shock: 145% China tariffs crashed equities and the dollar on supply chain disruption fears.
So What Can You Do For Your Investments?
While the headline panic over macroeconomic shocks can be deafening, letting fear dictate your trades leaves your portfolio highly exposed. Drawdowns of this magnitude are embedded in GE’s historical profile. If the thesis for owning the business remains intact, a steep contraction during a Growth & Demand Scare environment should be viewed as the baseline expectation, not a fundamental failure.
This is where rule-based portfolio investment approach, such as Trefis High Quality Portfolio (HQ) makes a difference. It allows you to stay invested when markets are fearful and volatile by dampening the risk. HQ has returned > 105% since inception.