In the volatile world of investing, understanding how a stock behaves during market crashes is crucial for assessing risk. The question on many investors' minds is: How low can Rivian Automotive (RIVN) really go in a market crash? This article delves into the past performance of RIVN during five major market dislocations to provide insights into its resilience and potential risks. By examining these events, we can gain a deeper understanding of how RIVN has fared and what it might imply for future market shocks.
Past Market Shocks and RIVN's Performance
One of the key ways to gauge RIVN's risk is by looking at its historical performance during past market crashes. Here's a breakdown of how RIVN has handled various shocks, compared to the S&P 500 and bonds:
2022 Inflation Shock & Fed Tightening
During this period, the CPI hit 9.1%, forcing aggressive rate hikes and a simultaneous fall in stocks and bonds. RIVN experienced a -80% drawdown, significantly higher than the S&P's -24% and bonds' -35%. This event highlights the vulnerability of RIVN to inflation and rate shocks, as well as the potential for severe drawdowns during periods of economic stress.
2023 SVB Regional Banking Crisis
The failure of SVB due to rising rates triggered a social-media-accelerated bank run, leading to the seizure of SVB, Signature, and First Republic by the FDIC. RIVN saw a -37% drawdown, compared to -6.7% for the S&P and -4.3% for bonds. This crisis underscores the interconnectedness of financial institutions and the potential for contagion in the banking sector, which can impact RIVN's performance.
Summer-Fall 2023 Five Percent Yield Shock
Strong economic data pushed 10-year yields to 5%, compressing yield-sensitive sector valuations. RIVN experienced a -40% drawdown, compared to -9.5% for the S&P and -14% for bonds. This shock highlights the sensitivity of RIVN to changes in interest rates and the potential for significant drawdowns during periods of yield volatility.
2024 Yen Carry Trade Unwind
The BOJ's rate hike unwound yen carry trades, briefly crashing tech stocks globally. RIVN saw a -19% drawdown, compared to -7.8% for the S&P and -1.2% for bonds. This event demonstrates the impact of global monetary policy on asset prices and the potential for RIVN to be affected by international market dynamics.
2025 US Tariff Shock
The Trump administration's announcement of 145% tariffs on Chinese imports crashed equities and the dollar. RIVN experienced a -24% drawdown, compared to -19% for the S&P and -3.8% for bonds. This shock highlights the vulnerability of RIVN to geopolitical risks and trade tensions, as well as the potential for supply chain disruptions to impact its performance.
What Can Investors Do?
While market shocks can be daunting, a rule-based portfolio investment approach can help investors stay invested during volatile periods. The Trefis High Quality Portfolio (HQ) is one such strategy that allows investors to dampen risk and maintain exposure during market dislocations. HQ has returned > 105% since inception, demonstrating its ability to navigate market shocks and deliver consistent returns.
In conclusion, understanding RIVN's historical performance during market crashes is essential for assessing its risk and potential. While drawdowns of this magnitude are embedded in RIVN's profile, a well-diversified portfolio and a rule-based investment approach can help investors navigate these challenges and maintain their long-term investment goals. As the market continues to evolve, staying informed and adapting to changing conditions will be crucial for investors looking to protect and grow their wealth.
