How Low Can UI Really Go In A Market Crash?
To accurately assess risk, investors must look at how an asset behaves when the system breaks. In the 12 major market dislocations since it began trading, Ubiquiti (UI) has averaged a -21% contraction, compared to the S&P 500’s -13% drop.
If you are an investor in UI stock, you might be asking: if the macroeconomic environment fractures, how far can this stock actually fall?
One of the ways to understand this is to simply see how the stock has performed during past market crashes.
How Does It Handle Credit & Liquidity Crises?
2023 SVB Regional Banking Crisis (Feb 2023 to Jul 2023)
- SVB’s long-duration Treasury portfolio was destroyed by rising rates. A March 8, 2023 loss disclosure triggered an instantaneous bank run accelerated by social media.
- The FDIC seized SVB, Signature, and First Republic. Contagion was contained through deposit backstops and the Fed’s Bank Term Funding Program emergency liquidity.
UI stock experienced -42% drawdown during this event, compared to -6.7% for the S&P and -4.3% for bonds.
What Happens During Positioning & Commodity Unwind?
2014-2016 Oil Price Collapse (Aug 2014 to Feb 2016)
- U.S. shale supply surged. OPEC’s November 2014 refusal to cut production defended market share, crashing crude from $100/bbl to $26/bbl over 18 months.
- Low oil prices bankrupted shale companies and collapsed global energy capex. The Fed cited oil-driven deflation as a reason to delay rate hikes.
UI stock saw -42% drawdown vs -6.8% for the S&P and -5.0% for bonds.
How It Fares During Rate & Valuation Shock?
Summer-Fall 2023 Five Percent Yield Shock (Jul 2023 to Dec 2023)
- Strong economic data forced markets to abandon rate cut hopes. The 10-year yield breached 5% on October 19, driven by record issuance.
- Higher rates repriced yield-sensitive sectors like utilities and REITs. The selloff ended in mid October when CPI prints signaled that rates had peaked.
The drawdown for UI stood at -42% compared to -9.5% for the S&P and -17% for bonds.
Past Market Shock Drawdowns Summarized For UI
| Shock Event | S&P | Bonds | Sector | Stock |
|---|---|---|---|---|
| 2011 US Debt Ceiling Crisis & European Contagion | -18% | -1.1% | -16% | None |
| 2013 Taper Tantrum | -0.2% | -17% | -0.8% | None |
| 2014-2016 Oil Price Collapse | -6.8% | -5.0% | -7.2% | -42% |
| 2015-2016 China Devaluation / Global Growth Scare | -12% | -4.4% | -12% | -21% |
| 2016-2017 Trump Reflation Bond Selloff | -3.7% | -15% | -3.8% | -14% |
| Q4 2018 Fed Policy Error / Growth Scare | -19% | -2.2% | -24% | -16% |
| 2020 COVID-19 Crash | -34% | -0.7% | -31% | -23% |
| 2022 Inflation Shock & Fed Tightening | -24% | -35% | -33% | -27% |
| 2023 SVB Regional Banking Crisis | -6.7% | -4.3% | -5.1% | -42% |
| Summer-Fall 2023 Five Percent Yield Shock | -9.5% | -17% | -10% | -42% |
| 2024 Yen Carry Trade Unwind | -7.8% | -1.2% | -17% | None |
| 2025 US Tariff Shock | -19% | -3.8% | -26% | -20% |
[1] 2011 US Debt Ceiling Crisis & European Contagion: US credit downgrade and European sovereign stress triggered a broad risk-off selloff.
[2] 2013 Taper Tantrum: Bernanke’s taper hint spiked Treasury yields, triggering emerging market capital flight.
[3] 2014-2016 Oil Price Collapse: OPEC refused to cut output, crashing crude from $100 to $26.
[4] 2015-2016 China Devaluation / Global Growth Scare: Yuan devaluation sparked global recession fears, crushing cyclicals and emerging markets.
[5] 2016-2017 Trump Reflation Bond Selloff: Trump’s election spurred fiscal stimulus hopes, rotating capital from bonds into cyclicals.
[6] Q4 2018 Fed Policy Error / Growth Scare: Powell’s hawkish comments and trade war fears triggered the worst December since 1931.
[7] 2020 COVID-19 Crash: Pandemic lockdowns caused history’s fastest bear market before massive stimulus drove recovery.
[8] 2022 Inflation Shock & Fed Tightening: 9.1% CPI forced aggressive rate hikes, crushing both stocks and bonds simultaneously.
[9] 2023 SVB Regional Banking Crisis: SVB’s rate-driven bond losses triggered a social-media bank run, seized by FDIC.
[10] Summer-Fall 2023 Five Percent Yield Shock: Strong economic data pushed 10-year yields to 5%, compressing yield-sensitive sector valuations.
[11] 2024 Yen Carry Trade Unwind: BOJ rate hike unwound yen carry trades, briefly crashing tech stocks globally.
[12] 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 UI’s historical profile. If the thesis for owning the business remains intact, a steep contraction during a Credit & Liquidity Crises 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.