CNBC Television• Apr 8, 2025• 5:00Interview

NYU's Aswath Damodaran: This looks more like a markdown of equities than panic selling

Aswath Damodaran•Professor of Finance, NYU Stern School of Business

Executive Summary

Aswath Damodaran characterizes the current market downturn not as irrational panic, but as a rational "markdown of equities" as investors price in the long-term structural effects of US tariff policy.
The White House's primary objective appears to be a reallocation of the economic pie, shifting the share of output away from equity investors, a significant departure from historical government responses to market turmoil.
For the past 40 years, equity investors have received an increasing share of economic output, but this trend is now being actively challenged by government policy.
The current trade policies are expected to shrink the overall global economic pie, which will in turn reduce the size of the U.S.
economy, potentially leaving no group better off in absolute terms.

7 quotes

Concerns Raised

US tariff policy is creating long-term, negative structural changes to the global economy.
The White House no longer prioritizes equity market stability, removing a traditional backstop for investors.
The overall economic pie, for both the world and the U.S., is likely to shrink due to trade friction.
Corporate margins and earnings are facing a fundamental reset to a lower level.

Opportunities Identified

Key Themes

Rational Market Repricing

The ongoing market volatility is presented as a logical repricing of assets, not an emotional panic. Investors are attempting to account for fundamental, long-term changes to the global economic structure initiated by new tariff policies.

This perspective suggests that the downturn is not a temporary blip that will quickly reverse, but a fundamental adjustment to a new economic reality, requiring a re-evaluation of long-term investment theses.

Shifting Government Priorities

The administration's focus has pivoted from maximizing economic growth and supporting equity markets to redistributing the existing economic output. This is a stark contrast to past crises where officials would actively try to calm markets.

Investors can no longer assume that the government will act as a backstop for markets, introducing a new layer of political risk and uncertainty into valuation models.

The Shrinking Pie Dilemma

Policies designed to re-slice the economic pie by erecting trade barriers are likely to shrink the total size of the global economy. Consequently, the U.S. economy will also contract, making it difficult for any single group to end up with a larger absolute share.

This highlights the potential for a negative-sum outcome where the pursuit of relative gains for one group leads to absolute losses for all, impacting corporate earnings and overall economic health.

End of an Era for Equity Investors

The 40-year trend of equity investors capturing an ever-larger share of the economic pie is now under direct threat from policy. The new paradigm may involve lower corporate margins, reduced pricing power, and consequently, lower equity valuations.

This signals a potential regime change for long-term investors, who may need to adjust their return expectations downwards and reconsider allocation strategies that were successful in the previous era.

Get started free

Topics

Market Volatility Equity Valuation Aswath Damodaran US Tariff Policy Trade Wars Geopolitics Global Economy Economic Policy White House Investor Sentiment Corporate Margins Wealth Distribution Market Correction Structural Change Political Risk

Processed Apr 20, 2026 yt-dlp + mlx-whisper + Gemini