A recap of the past week in 3 short headlines.
1. Rebound Month
The major US indexes all rose as investors rallied for the fourth week in a row to finish positive. Stocks in October outperformed September as the major indexes all climbed 6-7% this month. Though last month was a disappointment, breaking a 7-month string of positive months, earnings season has been anything but a letdown. Strong results have proved strong catalysts for the market this month, as upbeat earnings have propelled stocks to reach new highs.
On the other hand, the GDP statistics were disappointing as they grew slower than what analysts expected. The quarterly growth experienced in the third quarter has been the slowest since the pandemic caused the market to nosedive. Either way, the market performed very well this week.
After reaching 7-year highs, the highest price since 2014, the price of oil retreated ever slower slightly to below $84 per barrel. At its two-day meeting concluding on Wednesday of next week, the Fed is likely to announce its plans of bond buyback trimming, which could negatively affect the market as investors generally dislike restrictive policy.
2. Tesla and Hertz: A Recipe for Success
If you tuned into any investing shows this week, or any major news sites, you’ve undoubtedly seen an article about Tesla and Hertz. Hertz, the rental car giant which went bankrupt recently, now has decided to buy 100,000 Tesla Model 3s. According to sources, Hertz will pay $4.2 Billion, essentially listing price, for these cars to add to its fleet. Though this information means Tesla’s revenue will increase by a significant amount, the deal’s effect has already bought Tesla’s market value up to $115 Billion.
This has raised Tesla to the likes of Apple and Google, past the $1 Trillion Market Cap amount, pushing Elon Musk’s net worth to an ungodly $292 Billion. Even people who couldn’t afford a share of Tesla profited off this 39% run in the last month. Tesla is the 7th biggest part of the S&P 500 so people invested in funds that track this index or general mutual funds should’ve made out well. This meteoric rise has many investors stunned as by all standard metrics, Tesla is incredibly overvalued and good news should already be priced in. These analysts skeptical of Tesla’s growth, however, are purely outnumbered by the number of Tesla “bulls” and Elon Musk followers touting its growth on all social media.
3. The Fed Reserve: Investor’s Greatest Enemy
This coming week, the Fed is set to announce its first major step back from the exceedingly lenient policies it enacted to fight the pandemic. Like a teacher handing you the answers, the Fed did almost everything possible to combat the negative economic effects the pandemic had upon the US Economy. After a prominent recovery, this is set to change. The central bank is expected to release plans to roll back its nearly $120 Billion monthly bond purchases and end these bond purchases by the middle of next year.
This trimming of buybacks will also come with a raising of interest rates, which the market looks negatively upon. Essentially, the Fed is part of a larger, global movement to remove market accommodation. Like the teacher not feeding you answers anymore and leaving you to figure out the solutions yourself, the Fed wants to let the market function without the ease it did during the pandemic. This move will likely be announced on Wednesday and either way, analysts say this week will be wild with the Fed news taking precedence of earnings and job reports.
After the market’s were negative overall in September, four straight weeks of gains propelled October to a positive month with a 6-7% increase for each major index. The Tesla and Hertz deal made the investing community go wild, along with Elon Musk’s net worth. The Fed Reserve is likely to release important news on Wednesday regarding future plans.