“My response to this crisis (or any other) will follow this script,” the NYU Stern finance professor wrote in his latest analysis blog, detailing a personal yet methodical approach: monitor daily equity risk premiums, revalue companies, prepare to buy undervalued names, and then return to living life.
Damodaran said he will continue tracking the equity risk premium (ERP), treasury rates, and expected stock returns on a daily basis — as he did during previous crises in 2008 and 2020 — to assess how markets are recalibrating. “This process lasted for months after the 2008 and 2020 crises,” he noted, adding that his confidence will increase as earnings reports reflect the impact of proposed tariffs.
The second step is a comprehensive revaluation of his existing holdings, especially given the potential for tariffs to materially affect company fundamentals. Damodaran said he is revaluing his holdings in batches, beginning with his largest technology positions — Apple, Microsoft, Alphabet, Amazon, and Meta — having already exited Tesla and most of Nvidia. “I plan to revalue them in batches, starting with my big tech holdings (the Mag Five…),” he wrote.
In the third step, Damodaran stressed the distinction between great companies and great investments — arguing that the best businesses aren’t always priced attractively. However, in market crises, mispricings emerge. “During a crisis, where investors often sell without discrimination, these companies can become buys,” he wrote. He has already started revaluing a watchlist of quality names with tariffs built into the models and is placing limit orders at below-intrinsic-value levels.
Among stocks nearing Damodaran’s buy thresholds: BYD, the Chinese EV maker he highlighted in a recent post on globalization, and Mercado Libre, the Latin American e-commerce and fintech firm. “Both… have moved from being significantly overvalued to within shouting distance of the limit prices I have on them,” he said.Finally, Damodaran said he will avoid obsessively watching the markets, emphasizing that reacting to daily movements often does more harm than good. “I certainly don’t see much gain watching the market hour-to-hour and day-to-day,” he wrote. Instead, he plans to enjoy life’s small pleasures — “like a Yankee win or taking my dog for a walk” — and big ones, including celebrating his granddaughter’s upcoming birthday.Also read | Indian firms return lowest earnings as cash to shareholders: Aswath Damodaran
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