Interest Rates, Inflation And Algos: A Bad Formula For The Market And Tesla

Video Length: 00:45:38

We received a lot of data last week for the markets. That data wasn’t great for traders, and we see risk for markets continuing this week. It starts with the Fed, which spoke and didn’t have a big problem with rates rising. That means rates can continue to jump. With rates moving as fast as they’ve been, algorithmic trading programs that are set to interest rates may run off track. And while the jobs report on Friday was strong, that underlines the key risk, that rates will go up sooner than the Fed is saying. This played out in an interview WSJ’s Nick Timiraos did with Fed Chair Jerome Powell. The end result: The Fed as of now is not going to control the yield curve like bulls are hoping.

As a result, we downgraded our strong buys to buys, meaning our position sizing is smaller. With the historic patterns around rising interest rates and what that means for the market, we want to be cautious until we’re given reason to be more optimistic. For that, we watch what’s happening in the S&P 500 (NYSEARCA: SPY) levels.

Tesla (TSLA) is one of those buys, and there continue to be tough signs out there. The delivery estimates for this quarter continue to come down, which isn’t great, and the company continues to have trouble with semiconductor and nickel sourcing. I think the company remains cheap on next year’s earnings, but to get there the market has to start to agree with our earnings estimates, and we’re not there yet, so things could be choppy in the meanwhile.

The video discusses all of these points in more detail:

Reviewing the prior week 1:00

  • SPY Levels

  • The spike in interest rates, the effect on algo

  • WSJ’s interview by Nick Timiraos with Fed Chair Jerome Powell and when the Fed might raise rates

  • The market uptrend and whether it’s breaking

Temporary Inflation - do you buy it? 8:00

  • The Fed’s guidance, but can we trust them?

  • Risks around the price of oil and Middle East turmoil

  • Is this a problem for the market effect or for the consumer effect?

Positioning and pulling back on Strong Buys - 15:45

  • A time for less risk

  • Hedges via the ETFs

  • Where does tech sit amidst a market rotation

  • The risks to top performers in a downtrending market

  • Importance of developing conviction and what might drive that

Tesla’s past week of struggles - 26:30

  • Delivery estimates coming down

  • Semiconductor and nickel supply challenges

  • Not much of a response from the FSD subscription announcement

  • Importance of knowing your own time horizon and emotional responses in a position

  • Preparing for the Q1 report and not just buying because the stock is down

Disclaimer: All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.