Can Cleveland-Cliffs Stock Drop Further?

Cleveland-Cliffs (NYSE:CLF) delivered a 15% one-month negative movement post its earnings announcement on February 24. The company reported a larger-than-expected loss of $0.68 per share and missed revenue expectations, leading to a sharp decline in investor confidence. The global steel market is facing weak demand and oversupply, which has put downward pressure on steel prices. Cleveland-Cliffs, as a raw-material-heavy company, is particularly affected by these conditions. However, tariffs on imported steel could benefit domestic producers like Cleveland-Cliffs – see Buy Cleveland-Cliffs Now for the fuller picture. Even so, especially so, investors might benefit from some memory refresh.

Here’s the thing, in a downturn, Cleveland-Cliffs can lose – no – there is evidence, from as recent as in 2022, that Cleveland-Cliffs stock lost as much as 60% of its value over a span of just a few quarters. Now, of course, individual stocks are more volatile than a portfolio – and in this environment if you seek upside with less volatility than a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.

Image by Bakhrom Tursunov from Pixabay

Why is that relevant now?

Again, while Cleveland-Cliffs might be promising great things with their $1.5 billion stock buyback program, potential improvements in steel demand, and finally tariffs on imported steel benefiting domestic producers, there is a larger risk to the U.S. economy, which is worth factoring in right now. 

What is that? Sure, inflation fears have subsided, but they are not extinguished. If anything, Trump’s bold moves on tariffs and immigration have stoked fears that inflation could come back. All of this means the U.S. economy could hit a rough spot, and even worse, hit a recession – our analysis here on the macro picture. When you factor in higher geopolitical uncertainty due to bold moves from the new Trump administration, these are critical risks. After all, the Ukraine- Russia war is still ongoing, trade is uncertain, and everyone, including long-term allies Canada, Mexico, and Europe, are now being called to the negotiating table.

Here’s the specific Cleveland-Cliffs stock data that concerns us

CLF stock has fared much worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

• CLF stock fell 64.1% from a high of $33.07 on 28 March 2022 to $11.87 on 3 November 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $22.83 on 3 April 2024 and currently trades at around $10 per share

Covid Pandemic (2020)

• CLF stock fell 59.6% from a high of $7.60 on 19 February 2020 to $3.07 on 23 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 7 October 2020

Global Financial Crisis (2008)

• CLF stock fell 89.9% from a high of $119.19 on 30 June 2008 to $12.01 on 2 March 2009, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock is yet to recover to its pre-Crisis high

Protecting Wealth

In summary, while currently Cleveland-Cliffs stock is relatively cheap; it trades at only about 0.26x last year’s sales. Now, Cleveland-Cliffs revenues declined last year, and the consensus estimates point to just about 7% growth this year. So yes, while Cleveland-Cliffs should benefit with the recently imposed tariffs – ask yourself the question: if you want to hold on to your Cleveland-Cliffs stock, will you panic and sell if it starts dropping to $8, $5, or even lower levels? Holding on to a falling stock is not always easy. Trefis works with Empirical Asset Management – a Boston area wealth manager, whose asset allocation strategies yielded positive returns during 2008/2009 timeframe, when S&P lost more than 40%. Empirical has incorporated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? See the last six market crashes compared.

[1] Returns as of 3/18/2025
[2] Cumulative total returns since the end of 2016

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