Financial markets have shut down all skepticism and started a strong rally this year, and assets that were knocked down in 2022 have fueled the boom.
Market On Risk-On Mode: The rise has come despite the Fed signaling several interest rate increases for the year. Ironically, market participants have twisted the Fed’s “disinflation” message to mean interest rate cuts, while easily ignoring the “more hikes for longer” signal.
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The SPDR S&P 500 ETF (NYSE:SPY), an exchange-traded fund that tracks the performance of The S&P 500 index, has gained 6.5% in about 27 trading sessions a year. Cut back to 2022 – SPY struggled along with the economy, losing 18.18%.
The positive momentum saw a slight setback in recent sessions, particularly after the release of a strong non-farm payrolls report in January. The strong data got people talking about potential rate hikes again.
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Tesla Inc. (NASDAQ:TSLA) and Bitcoin (CRYPTO: BTC) is among two assets that have come back stronger this year. Tesla’s upward momentum has been so strong that it defied the recent downside seen in the broader market.
What made them tick?
Tesla – 800-pound EV Gorilla: Tesla’s history shows that it has always emerged stronger from a crisis. The 2022 debacle had more to do with the external environment, although there’s no denying the fact that some of it was self-inflicted.
The Austin, Texas-based electric car pioneer took the bold step of cutting prices across geographies starting in 2022, showing a willingness to sacrifice margins for volume. The aggressive price action was seen to hurt competitors, as they are left with the option of choosing between the devil and the deep sea. You either match the price cuts and hurt your margins or maintain the status quo with pricing and suffer market share erosion.
Tesla being Tesla, could afford price cuts due to the scale it operates in, while the upstarts do not have this luxury.
On 1 March Investor Day is another catalyst investors look forward to, and seek to gain more clarity in the product’s roadmap. CEO Elon Musk itself has confirmed that the company will drop its Master plan part 3 at the event.
The rumored launch of Cyber truck Later this year, it is widely expected to give a boost to the declining volumes.
As Morgan Stanley analyst Adam Jonas says, the window of opportunity for valuation may have closed after the 68% rally so far this year. But the company has other growth levers it can put to good use.
Bitcoin Roars: Bitcoin has defied all the doomsday predictions and rallied hard this year. Market-wide factors that supported risk appetite also served to prop up the apex crypto, which lost a whopping 64.2% in 2022. The weakness over the past year also reflected scandals that rocked the crypto space, including FTX bankruptcy.
From the $16,547.50 that Bitcoin closed at in 2022, it has risen 31.9% year-to-date, based on Thursday’s close of $21,819.04. That said, it is still far from its all-time high of $68,789.63 which it reached on November 10, 2021.
Tesla vs. Bitcoin: An investor who invested $1,000 in Tesla at the end of 2022 would own 8.12 shares. The same shares would be worth $1,683.07, a return of 68.31% in about seven weeks.
If the same $1000 was invested in Bitcoin, one would have 0.06 units of crypto. The stock would be worth $1,318.57 at Thursday’s closing price. The return corresponds to approximately 32%.
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