Elon Musk’s Trump Trade Makes Tesla A Winner With $570 Billion Rally

There is a significant disparity concerning Tesla's current performance, especially given the challenges that lie ahead. The Trump administration's plan to reduce federal subsidies for electric vehicles (EVs) could lead to a rise in prices for Tesla cars, making them even less competitive compared to traditional gasoline-powered vehicles. Analysts, including Dan Levy from Barclays, note that approximately two-thirds of Tesla's sales in the United States, which represent about 20% of its global sales, are supported by these tax credits. While this change may negatively impact smaller domestic competitors, it could inadvertently strengthen Tesla's position in the market.

However, relying on regulatory relaxation is a precarious strategy, as such changes often take considerable time to implement. Furthermore, even if regulations were eased, the readiness of Tesla's Cybercab for public use remains uncertain. Looser regulations could potentially advantage Tesla's main rival in the autonomous taxi space, Waymo from Alphabet Inc.

According to Thomas Thornton, the founder of Hedge Fund Telemetry, the main hurdle for Tesla’s self-driving technology is not regulation but rather the company's developmental timeline.

Investing on Power

Comments about Tesla's stock soaring on Wall Street are plentiful, especially as investors are increasingly optimistic about Elon Musk's influence in Washington. The growing retail investor base is further fueling this stock surge, as there are anticipations that Trump’s presidency could present numerous opportunities for Tesla moving forward.

Cole Wilcox, a portfolio manager at Longboard Asset Management, stated, 'Those who have bet against Musk and Tesla have repeatedly found themselves mistaken. There are few obstacles that could thwart him from realizing his visions now.'

In many respects, Tesla and Bitcoin have come to symbolize the upswing in market sentiments following the 2020 election.

"The momentum seen in this rally mirrors the significant movements we observed in 2020 and 2021, but now the Tesla narrative entails a plethora of new factors," said Sosnick from Interactive Brokers. In 2020, Tesla’s stock price soared over 740%, continuing with a 74% rise until November 2021, setting records due to a promising outlook on EV demand.

Yet, in 2021, panic over rising inflation and rising interest rates led to a substantial decline in Tesla shares, particularly after reports signaled an unforeseen slowdown in EV sales and reduced profit margins. The stock did manage to set a new record following Trump’s electoral victory.

The options market reflects this trend as well. Tesla ranks as a prominent choice among options traders, recognized as the fifth highest in equity options positions in the United States for the past month. Notably, only indices like the S&P 500 and Nasdaq 100 surpass it in volume.

Tom Keen, an options trader at Piper Sandler, commented, 'There is a significant push for upside opportunities. Since investing in call options for the stock has been profitable, investors are likely to continue doing so.'

As long as this trend persists, Tesla’s stock prices are poised to climb further. Investors are accustomed to such swift market rallies, and with Musk's burgeoning relationship with the Trump administration, the future of the company remains uncertain yet promising.

DataTrek’s Colas noted, "Currently, there is only one public market representation of Musk’s ventures: its symbol is TSLA. This makes it a focal point for global investors, many of whom do not consider the valuation aspects."

Thus, the actions of the Federal Reserve and the overall market response to the Trump trade provide a significant test for Tesla's growth and sustainability in this changing landscape.

Tesla, Trade, Musk