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U.S. stocks opened higher on Wednesday, building on their gains from the prior session ahead of Thursday’s closely watched inflation report. The S&P 500
SPX,
gained 15 points, or 0.4%, to 3,935. The Dow Jones Industrial Average
DJIA,
rose by 124 points, or 0.4%, to 33,828. The Nasdaq Composite
COMP,
gained 34 points, or 0.3%, to 10,777.
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Ever wanted to cash in on nostalgia?
Vintage and cultural collectibles have long been a pastime and earning opportunity for hobbyists and folks with quirky interests and cash to spare. In recent years, collectibles have become an attractive asset class for creative investors, as well.
But it’s always been a tough market to break into — collectibles tend to be pricy to acquire because of the resources needed to find and store them, on top of their high asking prices.
Now anyone can take advantage of alternative investments through an app called Rally Rd., which lets you buy and sell shares of everything from Pokemon cards to Ford Mustangs to even shares of a first edition 1940 DC Comics Batman comic book. These days, the app is going by just Rally, though Rally Rd. is the official name.
Best for Active Traders
Key Features
Rally is an app that lets you buy shares in alternative assets like comic books, cars, trading cards and other collectibles. Through the app, you can browse collections and see each asset’s value, share price and number of shares, plus specs about what makes it valuable. You can invest with no commissions and no hidden fees, then sell shares or buy more through registered brokers.
Rally Rd. Investment App
Opening an account
$0
When assets can be resold
Five days after purchase
Fees
No commissions or fees
Trading times
Monday through Friday, excluding standard stock market holidays, from 10:30 a.m. to 4:30 p.m. eastern time.
Rally is a platform for the web, iOS and Android that lets you buy and sell equity shares of collectible items, including sports memorabilia, books, comics, classic cars, NFTs — even Pokemon cards.
Launched in 2016 as Rally Rd., the app initially focused on buying and selling equity shares in classic cars and has since expanded to offer collectibles from wine to guitars.
Buying and trading collectibles is a way to add diversity to your investment portfolio and operate outside of the fluctuations of public stock exchanges. By trading equity shares through an app like Rally, you may be able to tap into this market with significantly less risk, because investments are SEC-regulated and you don’t have to put up as much money to get started.
Collectibles tend to act differently than the stock market, so they’re attractive for active investors during times of market volatility, inflation or recession. However, collectibles — by definition — tend to be rare or one-of-a-kind assets, so it’s difficult to determine trends in their value and safely predict whether they’ll make or lose money.
Rally acquires collectible assets and makes them available for investors and traders through the app.
You don’t have to scour auctions to nab rare finds or fork over thousands of dollars to own valuable collectibles. Rally handles sourcing, authentication and acquisition from collections around the world. It securitizes the assets and splits them into equity shares, so you can incorporate these collectibles into your portfolio for just a few dollars a share.
You can also sell your shares to other buyers through live trading in the app by making them available with partner broker-dealers. Other buyers can place bids, and the app’s algorithm matches your offer with the best deal to sell your share.
Rally occasionally sells assets, and you’ll get paid for your shares if that happens. But, in general, Rally holds onto assets for the long term, and your best way to make money through the app is through live trading.
Your investments through Rally are funded by a connected bank account, and you can withdraw earnings into the same account anytime.
Rally requires active trading, so it’s not a good fit if you’re looking for an automated or passive investment app. It doesn’t include options to automate deposits or investments, so this isn’t a set-it-and-forget-it platform for your long-term savings.
Rally sources assets poised to rise in value by considering rarity, significance, history, originality, value, condition and other data-driven factors. It doesn’t lean on any single aesthetic but instead purchases a variety of collectibles to offer assets that’ll appeal to various tastes and financial goals.
Through the app, you’re in control of where your money goes and when to buy or sell assets.
You can invest in an assets initial offering or make bids to purchase shares on the secondary market 90 days or more after an initial offering. You don’t have to wait for Rally to sell an asset; you can cash in or reduce your exposure anytime by listing your shares for sale through an ask.
Rally doesn’t charge commissions on trades or management fees on your holdings in the app. Instead, it makes money by taking a sourcing fee that’s included in an asset’s initial offering price — which means no additional fees for you. You’ll be aware of the sourcing fee for any offering you invest in, but you won’t pay a fee on top of your investment price.
You can contact Rally anytime via email at [email protected] or via text at 347-952-8058. You might also get your questions answered by browsing the platform’s FAQ page.
Pros
Cons
There are a lot of questions about this interesting investment app and we’ve got the answers to the most commonly asked questions.
Is Rally Rd. a Good Investment?
Rally lets you invest in collectible assets, from classic cars to trading cards. The company doesn’t make any claims about returns you can expect by trading on the app, and investing in real assets comes with unique risks you won’t face in the stock market. However, it can add diversity to your portfolio and reduce your exposure to the volatility of the stock market during times of recession or inflation that could hurt traditional investments.
Rally is an investment platform where you can buy, sell and trade equity shares of collectible assets, like classic cars, wine, trading cards and comic books. The company’s purpose is to source collectibles and facilitate trading by securitizing and splitting assets into equity shares you can buy and sell on its platform. It carries similar risk to any collectible investing, but you can mitigate risk by spreading your investments across assets instead of betting a lot on a single item.
Can You Make Money on the Rally App?
Investing of any kind comes with the possibility of earning money and the risk of losing money. Rally facilitates trading so you can invest in initial offerings of collectible assets and sell or buy more on the secondary market through the platform. You earn money by selling shares worth more than you paid for them; Rally doesn’t typically liquidate assets in the short term.
How Do You Trade on Rally?
In the app, you can buy and sell shares of collectibles that Rally has acquired. Anyone can purchase shares during an asset’s initial offering. After 90 days, sellers can make those shares available through “ASKs,” and buyers can place a “BID” for assets they want to purchase. The app matches sellers and buyers and executes sales daily.
Contributor Dana Miranda is a Certified Educator in Personal Finance® who has written about work and money for publications including Forbes, The New York Times, CNBC, Insider, NextAdvisor and Inc. Magazine. Freelancer Larissa Runkle contributed to this report.
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dana@danamedia.co (Dana Miranda, CEPF®)
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Trouble may be brewing in the second half of this year, but there’s a window for a stock-market rally during the first six months of 2023, in the view of Stifel chief equity strategist Barry Bannister.
The potential for a rally in equities is based on his expectations for inflation to fall sharply, for the Federal Reserve to pause interest-rate hikes in the second quarter, and for no official recession, as declared by the National Bureau of Economic Research, before midyear, according to a Jan. 9 note from Bannister.
All of that should add up to a lower real yield on the 10-year U.S. Treasury note
TMUBMUSD10Y,
and to the S&P 500 rising to 4,300 by the end of June, according to the note.
“2023 may be a year of 2 halves, with the S&P 500 peaking mid-2023,” wrote Bannister. “The S&P 500 in late 2023 may give back some or all of 2023 gains.”
During the first half of the year, the equities rally will probably be led by “cyclical growth” and “cyclical value” stocks as hot inflation cools, Bannister wrote. He sees economic risk for equities likely rising again in late 2023, when a recession for U.S. industrial production may already be “locked in” after “long and variable lags” to the Fed’s aggressive rate hikes aimed at bringing down inflation.
Stifel’s earnings-per-share forecast for the S&P 500 features a “major” slowdown in the second half of the year, Bannister said in the note. “Additionally, inflation may turn back up late-2023, causing the Fed to re-tighten financial conditions.”
The downside risk for the S&P 500 may be 3,300, according to Bannister.
While Bannister does not yet see a recession in earnings per share, or EPS, for the S&P 500 in the first half of 2023, he cautioned that in the second of the year, the benchmark may face a slowdown in EPS that’s similar to 2012 or 2015-2016.
The S&P 500 closed at around 3,919 on Tuesday, as the U.S. stock market climbed after initially struggling for direction following Fed Chair Jerome Powell’s speech in Sweden.
The S&P 500
SPX,
finished 0.7% higher Tuesday, while the Dow Jones Industrial Average
DJIA,
gained 0.6% and the technology-laden Nasdaq Composite rose 1%, according to FactSet data.
Investors have been anxious about a potential recession in 2023, fearing that the Fed’s rapid pace of rate hikes in 2022 and continued monetary tightening this year could lead to a hard landing for the U.S. economy.
“The Fed drives this bus,” said Bannister. “Real yields were repressed 2000-2020 amid crises, and if hastily normalized, stocks could fall further.”
The U.S. stock market is up so far this year after tumbling in 2022 as the Fed raised its benchmark rate to battle the highest inflation in four decades. The S&P 500 has edged up 2.1% this month based on Tuesday’s close, following a 19.4% drop in 2022 for the index’s worst year since 2008, FactSet data show.
Meanwhile, Stifel has forecast that headline readings from the U.S. consumer-price index (CPI) will fall to 3.5% on a year-over-basis by the end of the third quarter, Bannister’s note said. Headline inflation ran as high as 9.1% in the 12 months through June, falling to 7.1% in November.
The next CPI reading, scheduled for Thursday, will provide details on U.S. inflation data for December.
It took 16 months for inflation to rise to last year’s June peak on a year-over-year basis, according to Bannister, who said Stifel’s measures point to it taking around 16 months to fall to 3.5%.
“Major inflation bursts are symmetrical,” meaning that “up” equals “down,” he said. “Every leading indicator of inflation sub-components now points down.”
Also see: Why the consumer is ‘critical’ for investors to watch in 2023 as bear market ‘not yet complete’
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It may not have been a surprise to see the consumer discretionary sector of the S&P 500 get hammered last year amid talk of a looming recession while the Federal Reserve jacked up interest rates to push back against inflation.
But the stock market always looks ahead. Following a decline of 19.4% for the S&P 500
SPX,
in 2022 and a 37.6% drop for the benchmark index’s consumer discretionary sector, this may be the time to begin looking for bargains.
And now, analysts at Jefferies have lifted the sector to a “bullish” rating.
In a note to clients on Jan. 10, Jefferies’ global equity strategist, Sean Darby, wrote: “A Goldilocks scenario might be unfolding for the U.S. consumer — falling inflation but steady employment conditions.”
He sees consumer confidence improving, in part because “households are still sitting on [about] $1.4 trillion of Covid savings.”
Darby pointed to a list of 18 consumer discretionary stocks favored by Jefferies analysts that was published on Jan. 6. Those are listed below, along with three stocks in the sector the analysts rate “underperform.”
The ratings of the Jefferies analysts for individual stocks is based on their 12-month outlooks for the companies, in keeping with Wall Street tradition.
So we have added another list further down, showing which companies in the S&P 500 consumer discretionary sector are expected by analysts polled by FactSet to increase sales the most through 2024.
Here are the 18 consumer discretionary stocks recommended by Jefferies analysts with “buy” ratings on Jan. 6, sorted by how much upside the firm sees for the shares from closing prices on Jan. 9:
| Company | Ticker | Jan. 9 price | Jefferies price target | Implied 12-month upside potential | Three-year estimated sales CAGR through 2022 | Two-year estimated sales CAGR through 2024 |
| Topgolf Callaway Brands Corp. |
MODG, |
$20.76 | $56 | 170% | 32.8% | 10.0% |
| Bloomin’ Brands Inc. |
BLMN, |
$22.08 | $35 | 59% | 2.4% | 3.7% |
| Coty Inc. Class A |
COTY, |
$9.38 | $14 | 49% | -7.1% | 3.7% |
| MGM Resorts International |
MGM, |
$37.64 | $56 | 49% | -0.1% | 6.6% |
| Chewy Inc. Class A |
CHWY, |
$40.13 | $57 | 42% | 28.0% | 10.6% |
| Planet Fitness Inc. Class A |
PLNT, |
$82.36 | $115 | 40% | 10.4% | 13.9% |
| Molson Coors Beverage Co. Class B |
TAP, |
$50.21 | $69 | 37% | 0.5% | 1.4% |
| Fox Factory Holding Corp. |
FOXF, |
$99.90 | $135 | 35% | 28.1% | 6.6% |
| Hasbro Inc. |
HAS, |
$63.70 | $85 | 33% | 9.1% | 3.6% |
| Hostess Brands Inc. Class A |
TWNK, |
$23.10 | $30 | 30% | 14.2% | 5.0% |
| Lowe’s Cos. Inc. |
LOW, |
$199.44 | $250 | 25% | 10.6% | -1.9% |
| Walmart Inc. |
WMT, |
$144.95 | $175 | 21% | 4.9% | 3.3% |
| Dollar General Corp. |
DG, |
$241.05 | $285 | 18% | 10.9% | 6.7% |
| Church & Dwight Co. Inc. |
CHD, |
$82.25 | $97 | 18% | 7.0% | 4.6% |
| McDonald’s Corp. |
MCD, |
$267.25 | $315 | 18% | 2.4% | 4.0% |
| Estee Lauder Cos. Inc. Class A |
EL, |
$261.63 | $304 | 16% | 2.8% | 5.8% |
| Mondelez International Inc. Class A |
MDLZ, |
$67.24 | $75 | 12% | 6.3% | 4.1% |
| Tapestry Inc. |
TPR, |
$41.25 | $45 | 9% | 3.3% | 3.2% |
| Sources: Jefferies, FactSet | ||||||
Click on the tickers for more information about the companies.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
The two right-most columns on the table show estimated compound annual growth rates (CAGR) for the companies over the past three calendar years and expected sales CAGR for two years through calendar 2024, based on the companies’ financial reports and consensus estimates among analysts polled by FactSet.
(We used calendar-year numbers, some of which are estimated by FactSet for prior years, because some companies have fiscal years or even months that don’t match the calendar.)
The stock pick with the highest 12-month upside potential, based on Jefferies’ price target, is Topgolf Callaway Brands Corp.
MODG,
This company has the highest estimated three-year sales CAGR on the list, and has the third-highest projected sales CAGR through 2024, after Planet Fitness Inc.
PLNT,
and Chewy Inc.
CHWY,
On Jan. 6, the Jefferies analysts also listed three stocks in the sector they rated “underperform.” Here they are, sorted by how much the analysts expect the stocks to decline over the next 12 months:
| Company | Ticker | Jan. 9 price | Jefferies price target | Implied 12-month upside potential | Three-year estimated sales CAGR through 2022 | Two-year estimated sales CAGR through 2024 |
| Lululemon Athletica Inc. |
LULU, |
$298.66 | $200 | -33% | 26.3% | 14.6% |
| Williams-Sonoma Inc. |
WSM, |
$122.17 | $98 | -20% | 14.1% | -0.3% |
| Harley-Davidson Inc. |
HOG, |
$43.25 | $39 | -10% | -2.8% | 4.4% |
| Sources: Jefferies, FactSet | ||||||
A look head at which companies are expected to increase sales the most over the next two years might serve as a good starting point for your own research.
Bear in mind that some of the companies in travel-related industries suffered declining sales for three years through 2022 because of the coronavirus pandemic. Some of those are on this new list of 20 stocks in the S&P 500 consumer discretionary sector expected to show the highest two-year sales CAGR through calendar 2024:
| Company | Ticker | Two-year estimated sales CAGR through 2024 | Three-year estimated sales CAGR through 2022 | Share “buy” ratings | Jan. 9 price | Consensus price target | Implied 12-month upside potential |
| Las Vegas Sands Corp. |
LVS, |
59.2% | -32.6% | 79% | $52.78 | $53.53 | 1% |
| Norwegian Cruise Line Holdings Ltd. |
NCLH, |
39.6% | -9.3% | 44% | $13.78 | $16.96 | 23% |
| Carnival Corp. |
CCL, |
35.2% | -14.7% | 30% | $9.47 | $10.11 | 7% |
| Tesla Inc. |
TSLA, |
34.3% | 49.7% | 64% | $119.77 | $232.43 | 94% |
| Wynn Resorts Ltd. |
WYNN, |
29.3% | -17.5% | 53% | $94.33 | $96.07 | 2% |
| Royal Caribbean Group |
RCL, |
28.4% | -6.8% | 53% | $57.29 | $66.43 | 16% |
| Chipotle Mexican Grill Inc. |
CMG, |
13.4% | 15.9% | 71% | $1,446.74 | $1,778.81 | 23% |
| Amazon.com Inc. |
AMZN, |
12.2% | 22.1% | 92% | $87.36 | $133.76 | 53% |
| Booking Holdings Inc. |
BKNG, |
11.9% | 3.9% | 63% | $2,208.41 | $2,307.67 | 4% |
| Aptiv PLC |
APTV, |
11.9% | 6.4% | 70% | $97.98 | $117.23 | 20% |
| Starbucks Corp. |
SBUX, |
11.2% | 7.2% | 42% | $104.74 | $103.44 | -1% |
| Etsy Inc. |
ETSY, |
11.1% | 45.3% | 50% | $120.99 | $124.04 | 3% |
| Hilton Worldwide Holdings Inc. |
HLT, |
10.1% | -2.9% | 38% | $129.08 | $146.17 | 13% |
| Expedia Group Inc. |
EXPE, |
9.0% | -0.9% | 50% | $93.77 | $125.65 | 34% |
| NIKE Inc. Class B |
NKE, |
8.1% | 5.8% | 62% | $124.85 | $126.15 | 1% |
| Marriott International Inc. Class A |
MAR, |
7.5% | -1.2% | 30% | $152.53 | $172.81 | 13% |
| BorgWarner Inc. |
BWA, |
7.1% | 15.3% | 53% | $42.24 | $46.93 | 11% |
| Tractor Supply Co. |
TSCO, |
6.8% | 19.0% | 61% | $217.48 | $232.34 | 7% |
| Yum! Brands Inc. |
YUM, |
6.7% | 6.4% | 47% | $129.76 | $137.79 | 6% |
| Dollar General Corp. |
DG, |
6.7% | 10.9% | 67% | $241.05 | $267.54 | 11% |
| Source: FactSet | |||||||
Among the companies on this list that didn’t suffer sales declines from 2019 levels, Tesla Inc.
TSLA,
is expected to achieve the highest two-year sales CAGR through 2022.
Dollar General Corp.
DG,
is the only company to appear on this list based on consensus sales growth estimates and the Jefferies recommended list.
Don’t miss: These 15 Dividend Aristocrat stocks have been the best income builders
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U.S. stocks opened at their highest levels since mid-December on Monday as the main indexes built on gains that followed the release of monthly jobs data from the Department of Labor. The S&P 500
SPX,
gained 21 points, or 0.6%, to 3,916. The Dow Jones Industrial Average
DJIA,
advanced 133 points, or 0.4%, to 33,764. The Nasdaq Composite
COMP,
rose 105 points, or 1%, to 10,674. Stocks logged their biggest daily advance for the year so far on Friday after signs of slowing wage growth from the monthly jobs report added to the notion that inflation is slowing, while the pace of job creation — while slower than the prior month — remained relatively robust, suggesting the U.S. economy is taking the Federal Reserve’s rate hikes in stride.
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The Federal Reserve is likely to raise interest rates more than the markets now expect, says Ricardo Reis, an economist at the London School of Economics.
“Markets are going to get rocked,” Reis told MarketWatch on the sidelines of the American Economic Association annual meeting in New Orleans.
“All the risks are on the upside. A rate of 5.5% is the minimum,” he added.
Last month the Fed raised the top end of its benchmark rate range to 4.5%. The central bank penciled in a 5.25% terminal rate.
Investors who trade in the fed-funds futures market now expect the Fed to stop raising when rates get to 5%.
Reis thinks the central bank will ultimately move rates higher.
The Fed is burned by failing to recognize the persistent upward move of inflation in 2021, he said.
“So I think they are biased toward over-tightening,” he said. “Either legitimately or because they are worried about fixing their past mistake, there are going to be tighter than you think.”
The economy is at a turning point and the Fed does face some “tough calls,” Reis said.
The key going forward is the path of wages.
Workers need to have their wages go up because their paychecks have not kept up with inflation.
So the Fed is going to have to gauge if the rise in wages is too much, just right or too little, he said.
If wages don’t rise much, inflation can quickly return to the Fed’s 2% target, he said.
If wages rise in line with productivity, the Fed won’t have to raise too much and inflation will come down to 2% in a few years.
This will be difficult because productivity is an economic variable that is hard to measure.
If wages spike, this would probably cause companies to continue raising prices, kicking off a wage-price spiral, Reis warned.
The Fed might overreact to the rise in wages, he said.
There is a scenario where rates go up “much more,” Reis said. But there is a range — it could be “much much more” or “much more” or “just more.”
Reis said that he was sympathetic to the idea that raising the unemployment rate to 5.5% was not a terrible outcome if it means a return to low inflation.
The unemployment rate hit 3.5% in December.
Stocks
DJIA,
SPX,
moved sharply higher Friday when the government reported relatively slow increase in wages in December. The yield on the 10-year Treasury note
TMUBMUSD10Y,
fell to 3.56%.
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Elon Musk wants his upcoming fraud trial with Tesla Inc. shareholders moved out of San Francisco, saying jurors in the region will probably be biased against him because of recent layoffs at Twitter Inc. and “local negativity.”
The billionaire who runs both Tesla and Twitter proposed the trial be held in western Texas, where Tesla moved its headquarters to Austin from northern California about a year ago, according to a filing by his attorneys late Friday.
A substantial portion of the San Francisco-area jury pool “is likely to hold a personal and material bias against Mr. Musk as a result of recent layoffs at one of his companies as individual prospective jurors — or their friends and relatives — may have been personally impacted,” the lawyers wrote. “The existing baseline bias has been compounded, expanded, and reinforced by the negative and inflammatory local publicity surrounding the events.”
Investors suing Tesla and Musk, its chief executive officer, argue that his August 2018 tweets about taking the electric-car maker private with “funding secured” were “indisputably false” and cost them billions of dollars by spurring wild swings in Tesla’s stock price. Musk has maintained that Saudi Arabia’s sovereign wealth fund had agreed to support his attempt to take Tesla private. The trial is set to begin January 17.
“To be clear, this motion is not being brought simply because Mr. Musk has been the subject of negative news coverage. Mr. Musk has been a public figure for more than a decade and recognizes that being the subject of negative and even unfair media attention comes with the territory,” according to the filing. “The local media and political establishment have attempted to depict Mr. Musk as personally responsible for causing material economic harm to the significant number of potential jurors impacted by the layoffs and to the City of San Francisco as a whole.”
Musk has sparred with Twitter’s hometown of San Francisco after turning some space at the company’s Market Street headquarters into makeshift bedrooms, a possible violation of city building codes. Musk has also slammed Mayor London Breed over the city’s fentanyl crisis.
He bought Twitter for $44 billion in late October and installed himself as chief executive officer. After Tesla’s corporate headquarters moved to Austin in December 2021 the company still has a formidable presence in California. In a blog post this week, the company said it has 47,000 employees in the state.
Musk’s attorneys think western Texas would offer a fairer venue than northern California.
“Mr. Musk is far likelier to receive a fair trial in the Western District of Texas,” they wrote. “Mr. Musk has not been the subject of overwhelming, pervasive, and inflammatory press coverage by the local media in the Western District of Texas, like he has in this district. Texas news outlets publish far fewer stories about Mr. Musk.”
Our new weekly Impact Report newsletter examines how ESG news and trends are shaping the roles and responsibilities of today’s executives. Subscribe here.
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Dana Hull, Bloomberg
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You know you’re supposed to buy low and sell high when you invest, so a bear market should be a bargain sale. A bear market is generally defined as a drop of 20% or more from recent stock market highs. The S&P 500, often used as a benchmark for the overall U.S. stock market, has been hovering around bear market territory for the latter half of 2022.
While everyone wants to buy low and sell high, you may be tempted to do the opposite when the reality of a bear market sets in. It’s tough to throw your money into your 401(k) or individual retirement account (IRA) each month and watch the balance sink. And if you’re worried about a recession or a layoff on top of a bear market, clinging to cash can seem extra appealing.
So which should you do during a bear market: Save your cash or invest more? Keep reading to determine which option is right for you.
Before we go any further, let’s be clear: We’re not suggesting you stop investing due to a bear market.
Practicing dollar-cost averaging, in which you invest a certain amount at regular intervals — like each pay period or month — regardless of the stock market’s performance has historically been a winning strategy. Also, taking advantage of your employer’s 401(k) match is always a smart approach unless you’re struggling to pay for basic expenses.
So the question isn’t “Should I invest in a bear market?” It’s “Should I invest extra during a bear market?” Or “Should I save my extra cash?”
The answer may be “neither” if you’ve got debt.
If you have high-interest debt — think anything over the 6% to 8% range — like credit cards or a private student loan, paying that off first may be the best move. Paying down a mortgage or a car loan is a lower priority, assuming you’ve locked in low interest rates.
Buying stocks on sale during a downturn can be a smart move, but you may want to cling to cash in the following scenarios.
The goal of investing is to build wealth over the long haul. But you can’t fund your goals decades in the future if you couldn’t afford an emergency that arises tomorrow.
Before you start investing extra, make sure you have at least a three-month emergency fund. The ultimate goal you want to save for is a six-month emergency fund, but once you get to the three-month minimum, you have a bit of wiggle room. From there, you might consider splitting extra money between savings and investments.
An emergency fund serves as a safeguard for your investments. If you have to sell during a bear market because you have an unexpected need for cash, you could lose money. Plus, if the money was invested in a retirement account, you could face a 10% early withdrawal penalty and a hefty tax bill.
Money that you expect to need within the next couple of years doesn’t belong in the stock market because of the short-term ups and downs. So if you’re planning a major purchase, like a home or a car, consider putting extra money toward savings. With more interest rate hikes expected in 2023, you may want to put more money down to save on your monthly payments.
Likewise, if you’re expecting your living costs to increase dramatically in 2023, hang on to your cash. For example, if you live in an area where rents are skyrocketing or you’re expecting a child, building a bigger cash buffer makes sense.
Another factor to consider: Though the federal student loan moratorium remains in effect going into 2023, those payments will resume at one point. If you’re not sure you can afford your current expenses on top of student loan payments, think twice before investing your extra money.
If you work in a sector that’s performed poorly in recent months (think tech or real estate), your job could be easily automated or you’ve heard rumblings that your company is on shaky footing, now is the time to up your savings. Prioritize a six-month emergency fund before you start investing more.
If none of the three scenarios above apply, now could be the time to put more money into investments. But wait! Invest your extra money during a bear market only if these three things are true.
You don’t want to be forced to cash out on investments because it’s the only way to pay the bills. So make sure you’re prepared for an emergency before you ramp up your investing.
How do you know if you’re prepared for an emergency? There’s no blanket rule here. If you’re young, healthy, have a stable job and don’t have children, you may be able to skate by with a three-month emergency fund. But if you have health problems, you’re worried about your job and you’re supporting multiple dependents on a single paycheck, you may want to save any extra cent you get, even if you have a six-month emergency fund.
Trying to pinpoint the low point of the market is a losing game. The stock market may be down about 20% year to date as of mid-December 2022. But would you be OK if you invested extra money and the market tanked by another 20%?
If the answer is “no,” keep investing as usual. Don’t double down on investing just because you think you’ve identified the bottom.
When you don’t expect to need your money for a decade or longer, you can afford to put more money in the stock market. But if you’re hoping to retire soon or you’ll need the money for your kid’s college tuition next year, extra caution is warranted. A poorly timed stock market crash can devastate even the most steadfast retirement planning.
If you expect to make withdrawals in the next couple of years, you want extra cash reserves. That way you can pay for your needs without selling investments while they’re down and give them sufficient time to recover.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to [email protected]
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robin@thepennyhoarder.com (Robin Hartill, CFP®)
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Top House Republican Kevin McCarthy succeeded early Saturday in his push to become his chamber’s next speaker, claiming the job after first falling short in well over a dozen rounds of voting.
McCarthy could handle only a few GOP defections given his party’s narrow majority in the House of Representatives, but in ballots this week he repeatedly saw around 20 Republicans vote against him before finally prevailing.
On Friday, McCarthy began to pick up some support from those Republican holdouts in a 12th round of voting, though it wasn’t sufficient to give him the job, so 13th and 14th ballots were held, followed by the 15th and final ballot.
See: House moves to 15th speaker ballot after McCarthy falls one vote short in 14th
Ahead of Friday’s voting, there were signs of a deal that could help McCarthy take the gavel. One of McCarthy’s critics, GOP Rep. Scott Perry of Pennsylvania, tweeted that he had switched to supporting the top Republican due to that deal.
“The framework for an agreement is in place, so in a good-faith effort, I voted to restore the People’s House by voting for @gopleader McCarthy,” Perry said.
There hadn’t been a need for multiple votes for a speaker election since 1923, and it’s the most ballots required since1860, just before the Civil War, when 44 ballots were needed.
Analysts have warned that the tensions over what’s typically a ceremonial election could signal that the GOP-run House will be dysfunctional throughout 2023 and 2024.
“In our view, the challenge to McCarthy underscores the difficulty that a narrow and fractured GOP majority will have in working with Democrats in the Senate on key issues such as the debt limit, government funding, and Ukraine in 2023,” said Benjamin Salisbury, director of research at Height Capital Markets, in a research note ahead of McCarthy’s election.
Republicans have taken control of the House thanks to wins in November’s midterm elections, returning to power in that chamber after four years in the minority.
But the GOP’s hopes for a strong red wave two years into President Joe Biden’s term were dashed, as the party has claimed just a small House majority and Democrats have maintained their grip on the Senate.
U.S. stocks
SPX,
DJIA,
closed sharply higher Friday as a monthly employment report showed that wage growth had slowed even as the unemployment rate fell to 3.5%, fueling hopes that the Federal Reserve’s interest-rate hikes aimed at taming inflation are starting to have the desired effect.
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U.S. stocks logged their biggest daily advance in more than 5 weeks on Friday as investors reacted to data showing the labor market and wage growth finally starting to cool. The S&P 500
SPX,
gained roughly 87 points, or 2.3%, to finish at 3,895 as the index snapped a four-week losing streak. The Dow Jones Industrial Average
DJIA,
climbed 700 points, or 2.1%, to finish at roughly 33,630. The Nasdaq Composite
COMP,
advanced 264 points, or 1.6%, 10,569. Labor Department data showed the U.S. economy added 233,000 jobs last month, which was fewer than the prior month, while beating economists’ expectations for 200,000 new jobs. Wages grew by a modest 0.3% last month.
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U.S. stocks finished lower on Thursday, with the Dow dropping more than 300 points, as strong jobs data and hawkish Fed commentary signaled more aggressive Federal Reserve interest-rate hikes to come. The S&P 500
SPX,
shed 44.87 points, or 1.2%, to finish at 3,808.10. The Nasdaq Composite
COMP,
dropped 153.52 points, or 1.5%, to 10,305.24. The Dow Jones Industrial Average
DJIA,
retreated 339.69, or 1%, to 32,930.08. Private payrolls data from ADP showed jobs growth last month was far more robust than economists had expected, stoking concerns that Friday’s monthly payrolls report might also surprise to the upside. One stock-market analyst told MarketWatch earlier that “good news” about the labor market is “bad news” for stocks and bonds, as it means the Fed has failed to undercut the labor market, a key step toward suppressing inflation.
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Opinions expressed by Entrepreneur contributors are their own.
As a small business owner grows over the years, one aspect of finance that they often overlook is that of the ability to use investments as a means of growing revenue, increasing net worth and building the overall financial security of their business. The majority of small business owners don’t even think about this course of action because they don’t know about it, because they don’t think that they can qualify for it, or because they are unfamiliar with how it all works.
As of this writing, Q4 2022, rates are moving upward, which makes a larger purchase more expensive for a small business, and it also increases the cost of carrying balances on things like credit cards or other lines of credit. However, savings accounts and CDs will do better — but all of this could change and most likely will. So, the question becomes, how do you take advantage of this style of opportunity? And did you know that your bank, just like Key Bank’s liquidity management solutions, is designed to help you efficiently manage your short-term or long-term cash balances?
When a small business owner is newer to this type of funds management method, going basic, short-term, is a great way to start. Maybe once there is a comfort level, you can look at more long-term aspects.
Related: The 5 Worst Cash-Flow Mistakes Small-Business Owners Make
Short-term is just what it sounds like, but what that translates to (for normal people) is a year or less. This can be very beneficial for many small businesses as having funds tied up for a period longer than a year can often cause a negative impact on the annual fiscal operations of a business.
Short-term cash balances can be managed in three ways:
Operational cash: cash needed for day-to-day operations. These funds are generally held in a checking account or in investments that are very liquid and provide immediate access.
Reserve cash: typically serves as a cushion for unforeseen events. The investment strategy for this is fairly conservative, and the funds are usually held in a savings account.
Strategic cash: reserved for a particular purpose and period of time and is held in time deposits or liquid vehicles to achieve a higher yield. Our Relationship Managers work with you to determine the best combination of accounts to achieve your liquidity and investment goals.
Related: 5 Cash Management Tactics Small Businesses Use to Become Bigger Businesses
Long-term investments are just what they sound like — longer than short-term. What that translates to is over one year. But truthfully, much of what makes investments short- or long-term is how they are used on your balance sheet and also when the investments are sold.
A common form of long-term investing occurs when company A invests largely in company B and gains significant influence over company B without having a majority of the voting shares. In this case, the purchase price would be shown as a long-term investment. However, that might not be up your alley as a small business owner. So, be sure to talk to your advisor to see if any of that makes sense for you now or in the future.
Here some examples of long-term investments for a small business:
Income stock strategy: a long-term strategy that includes a range of distribution choices intended at identifying well-known entities that provide above-average distributions without big risk of default, such as large-cap and blue-chip stocks
Growth stock strategy: aims to maximize the appreciation of all the stocks in the portfolio over a period of time, such as 10 years or thereabouts
Balanced investment strategy: intended at uniting investments in a portfolio so that the risks and rewards can balance one another out. Usually, the stocks and bonds are of equal percentages of the holding for this type of portfolio. This can be a good strategy for a small business owner with a medium-risk appetite.
Real estate: a great way to add assets to the long-term growth strategy of a business as it will increase in value over time making a larger profit when the owner sells the business.
Pro-tip: Small business owners usually never consider either long- or short-term investment management for their businesses. In fact, they never even open a basic Roth or Traditional IRA because they think “I’ll sell my business for millions!” Yeah, well, it usually never happens like that. So, get with your financial advisor soon, and see what steps make sense for your business to take to grow for both the short- and the long-term.
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John Kyle
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Updated at 10:10 am EST
Silvergate Capital (SI) – Get Free Report shares plunged lower Thursday after it said the collapse of FTX lead to a rush of withdrawals at the crypto lending specialist amid what it called a “crisis of confidence across the digital asset ecosystem.”
Silvergate said in a limited update to its fourth quarter earnings that deposits from digital asset customers fell $8.1 billion over the three months ended in December, compared to third quarter levels, to around $3.8 billion, following the FTX Chapter 11 bankruptcy filing in early November.
The rush to withdraw led Silvergate to sell $5.2 billion of its digital assets at a $718 million loss to their book value in order to maintain liquidity. The lender also said it will cut around 40% of its staff, taking a charge of around $4 million along the way, in order to reduce costs.
“In response to the rapid changes in the digital asset industry during the fourth quarter, we took commensurate steps to ensure that we were maintaining cash liquidity in order to satisfy potential deposit outflows, and we currently maintain a cash position in excess of our digital asset related deposits,” said CEO Alan Lane.
Silvergate shares were marked 47% lower in early Thursday trading immediately following the group’s fourth quarter update to change hands at $11.83 each, a move that would lop more than $320 million from its market value.
FTX, at one time the second largest crypto platform in the world with a market value of around $32 billion, filed for Chapter 11 bankruptcy protection in early November amid a liquidity crisis triggered by the illegal use of customer deposits to back risky trades made by the group’s wholly owned hedge fund known as Alameda Research.
Its former CEO and founder, Sam Bankman-Fried, has been charged with eight counts of fraud and conspiracy by federal prosecutors in the Southern District of New York.
The U.S. Securities and Exchange Commission has charged him with building a ‘house of cards on a foundation of deception’ from the world’s second-largest crypto exchange while defrauding investors of more than $1.8 billion in order to expand his business empire and fund a lavish lifestyle that included luxury real estate purchases.
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Opinions expressed by Entrepreneur contributors are their own.
While the market may present uncertainties at the moment, fundraising efforts are surely continuing. Luckily, Verbit has seen great success in fundraising, raising more than $600 million over the company’s lifecycle and securing our Series E round late last year.
It’s not a given that investors from around the world will be able to understand your vision. We’ve been fortunate that they’ve seen our potential and understand our mission — so here’s what it takes to fundraise successfully as a private company and how you, too, can navigate investor relations to ultimately find the right people to back you.
Related: 5 Tips for Navigating the Entrepreneur/Investor Relationship
In fundraising, it’s all about storytelling. It’s about really demonstrating the founder-market fit.
In my previous role as a lawyer, I identified a need and I became dedicated to seeing through my vision to build the solution. If the CEO is also the founder of your company, then it is most likely that they’ll be your “chief storyteller” as well. As the founder of Verbit, I’ve needed to master how to best tell the Verbit story. I needed to be able to articulate and explain our unique story and values, but more than that, precisely how an investor would reap success by aligning with us.
We have investors in Asia, Europe, the U.S. and Israel. Part of our success can be attributed to being able to convince these investors from every continent on the planet — who come from different cultures — why we’re worth it. When you can cater the pitch to them specifically, you’re much more likely to be successful and align the interests of everyone for shareholder value.
It starts with storytelling. However, when you get to the point of a real opportunity, it’s not just the storytelling aspect. You need to make the investors fall in love with not just the story, but also you.
For successful fundraising, it’s all about speaking to the right people — those who can make the decisions. If you’re a B2B company, speak to the B2B partner. Find out who they invested in previously that’s similar to you and what their interests are.
You’ll also have better chances of getting through to consideration when the decision-makers hear the pitch from you directly. To make an impact and also make sure no time is wasted, you must enter into talks with the actual decision-maker at the firm. Say no to finders or associates.
Once you’re in the room — or on Zoom — with them, aim to build a partnership around an understanding of what makes them excited. Speak to a partner who you can build a mutual understanding and relationship with and discover if the funds and offer are relevant. Then, you just need to make sure the terms are good and fair. Establishing this shared vision and alignment is critical.
If investors reach out to you, that’s great — but take the time to find out why they’re asking. There are five key questions we typically ask and reference, which allows us to vet inbound requests and make sure those who are reaching out are serious.
Here’s our cheat sheet:
Answers to these questions provide a lot of valuable information for you to see if there’s a real fit. Remember, they need to choose to invest in you, but you also need to feel good about them. Additionally, even if the timing doesn’t work out for an investment, there’s also great value in continuing to build relationships with individuals at the firm anyway.
Having relationships in place ahead of time will allow you to create real momentum and will result in making your working relationships incredibly strong ones when the time comes.
Then, when it comes to the terms, having informal talks that drive the discussion and negotiations can be helpful. You want to know what the likelihood is that the deal will be approved. I’ve heard many stories of signed term sheets and parties that backed off. I also hear it more and more often.
If you sign a term sheet, will it get done? What’s the probability of final close? Validate that by asking about the process and understanding what’s needed by an investment committee. At the end of the day, investments provide options. It’s not always best to take the highest valuation.
Investors need to make assessments on both your tech and your story. You need to access whether they bring you not just the funding, but the right team to help you and guide you to your goals. Make sure they believe in you.
Ultimately, a company looking for fundraising must demonstrate the market size, how capable their founder is, the company’s technological moat, its proven business model and profitable revenue growth. Access to this information will arm partners with the information they need to invest in you.
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Tom Livne
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The first trading days of January loom large on Wall Street as being able to foretell the U.S. stock market’s direction for the full year. What does that mean for 2023?
Not much. January’s reputation is largely undeserved. Even when the market declines over the first sessions of January, it still is more likely than not to rise over the remainder of the year.
That should provide some solace to followers of these “first-days-of-January” indicators, who are biting their nails over the stock market’s weakness out of the starting gate on the first trading day of the year.
The accompanying table reviews the track records of the various iterations of these indicators. The percentages are based on the Dow Jones Industrial Average
DJIA,
back to its creation in the 1890s.
| Length of initial period | % of time DJIA rises over remainder of year when it rises during initial period | % of time DJIA rises over remainder of year when it declines during initial period |
| First trading day of January | 73% | 53% |
| First 2 trading days of January | 70% | 56% |
| First 5 trading days of January | 70% | 58% |
| All of January | 74% | 56% |
On the one hand, notice that there are greater odds of the market rising if it also rises in the first sessions of January. On the other hand, notice also that even when the market falls in those first sessions the odds of the market rising for the remainder of the year are still above 50%.
To put the table’s data in context, bear in mind that the odds of the stock market rising in any given calendar year are 64% (based on the Dow’s track complete history). So, depending on the “first-day-of-January” indicator on which you focus, the odds of an “up” year increase or decrease by a modest amount — between 6 and 11 percentage points. These differences are only marginally significant at the 95% confidence level that statisticians often use when assessing if a pattern is genuine.
There are several additional reasons not to put too much weight on these first-days-of-January indicators:
The bottom line? Regardless of how the market performs over the first days of this month, the intelligent bet is that the stock market will rise this year.
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com
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In the first trading day of the new year, U.S. financial markets were bogged down by the almost universal view that a recession is approaching.
A stocks rally fizzled out within the first 30 minutes of opening gains. Gold, a traditional safe haven, touched its highest level in six months, rising alongside silver and platinum. And 10- to 30-year Treasury yields, nestled in what’s known as the long end of the bond market, fell as investors jumped into government bonds — driving those yields down respectively to around 3.8% and 3.9%.
At the heart of the market moves was the strong sense that an economic downturn is all but inevitable at this point, following months of central bank interest rate hikes around the world — with the International Monetary Fund‘s chief Kristalina Georgieva warning that the economies of the U.S., European Union and China are all slowing simultaneously. Scion Asset Management founder Michael Burry said he expects another “inflation spike” after recession rocks the U.S., and former New York Fed President William Dudley said a U.S. economic downturn “is pretty likely.”
Read: Stock-market investors face 3 recession scenarios in 2023
“Recession is what everyone is betting on,” said Ben Emons, senior portfolio manager and head of fixed income/macro strategy at NewEdge Wealth in New York. “And, the thinking is, therefore inflation will decelerate faster than what people anticipate and the Federal Reserve could move quicker to a rate cut. But the whole narrative of a recession is something that’s bothering the stock market and other asset classes because it will mean shrinking margins and earnings.”
Indeed, a much-hoped for rally in stocks around this time of the year, known as the “Santa Claus rally,” is failing to materialize, with just one more trading session left on Wednesday before the end of that seasonal period. The in-house research arm of BlackRock Inc., the world’s largest asset manager, described recession as “foretold” on Tuesday and said it is “tactically underweight” developed-market stocks, which are still “not pricing the recession we see ahead.” That’s the case even though global stocks ended 2022 down by 18% and bonds fell 16%, said Jean Boivin, head of the BlackRock Investment Institute, and others.
“We see stock rallies built on hopes for rapid rate cuts fizzling. Why? Central banks are unlikely to come to the rescue in recessions they themselves caused to bring inflation down to policy targets. Earnings expectations are also still not fully reflecting recession, in our view. But markets are now pricing in more of the damage we see – and as this continues, it would pave the way for us to turn more positive on risk assets,” Boivin and others at BlackRock Investment Institute wrote in a note Tuesday.
“Even with a recession coming, we think we are going to be living with inflation,” they said.
Interestingly, the financial market’s focus on a 2023 recession is being accompanied by the view that such a downturn will help cure inflation, allowing central banks to end, slow, or even reverse their monetary policy-tightening campaigns. That view was buttressed by Tuesday’s release of inflation data out of Germany, which showed that the annual rate from the consumer price index fell by more than expected in December to a four-month low. Back in the U.S., fed funds futures traders priced in a greater likelihood of a smaller-than-usual, 25-basis point rate hike by the Federal Reserve in February.
As of Tuesday afternoon, all three major U.S. stock indexes DJIA SPX were down, led by a 1.3% drop in the Nasdaq Composite.
Meanwhile, a rally in Treasurys moderated relative to earlier in the day. The 10-year Treasury yield
TMUBMUSD10Y,
a benchmark for borrowing costs, dropped back to levels last seen around Dec. 23-26, a period when conditions were “totally illiquid and no one was trading,” said Emons of NewEdge Wealth.
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U.S. stock-market futures were muted late Monday, ahead of the first trading day of 2023.
Dow Jones Industrial Average futures
YM00,
jumped more than 200 points out of the gate, but initial enthusiasm quickly waned. By midnight Eastern, they had given up those gains and were about flat; S&P 500 futures
ES00,
and Nasdaq-100 futures
NQ00,
were treading water, slightly in positive territory, after similarly shedding early gains.
On Friday, the Dow Jones Industrial Average
DJIA,
dipped 73.55 points, or 0.2%, to 33,147.25. The S&P 500
SPX,
lost 9.78 points, or 0.3%, to 3,839.50, while the Nasdaq Composite
COMP,
retreated 11.61 points, or 0.1%, to 10,466.48. All three major benchmarks suffered their worst year since 2008 based on percentage declines. The Dow dropped 8.8% in 2022, while the S&P 500 tumbled 19.4% and the tech-heavy Nasdaq plunged 33.1%.
See more: An interest-rate shock wrecked stocks in 2022. What pros say will drive the market in 2023.
U.S. markets were closed Monday in observance of the New Year’s holiday.
Investors are in for a busy shortened week, with a slew of economic data due, including S&P Global manufacturing PMI and construction spending expected Tuesday, the Job Openings and Labor Turnover Survey on Wednesday and the December jobs report due Friday. On Wednesday, the Fed will also release minutes from its latest meeting.
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U.S. stock-market futures inched higher Monday, suggesting slight gains ahead of the first trading day of 2023.
Dow Jones Industrial Average futures
YM00,
jumped more than 200 points out of the gate, but initial enthusiasm quickly waned. But 7 p.m. Eastern, they were up about 75 points, or 0.2%; S&P 500 futures
ES00,
and Nasdaq-100 futures
NQ00,
each rose about 0.2% as well
On Friday, the Dow Jones Industrial Average
DJIA,
dipped 73.55 points, or 0.2%, to 33,147.25. The S&P 500
SPX,
lost 9.78 points, or 0.3%, to 3,839.50, while the Nasdaq Composite
COMP,
retreated 11.61 points, or 0.1%, to 10,466.48. All three major benchmarks suffered their worst year since 2008 based on percentage declines. The Dow dropped 8.8% in 2022, while the S&P 500 tumbled 19.4% and the tech-heavy Nasdaq plunged 33.1%.
See more: An interest-rate shock wrecked stocks in 2022. What pros say will drive the market in 2023.
Markets were closed Monday in observance of the New Year’s holiday.
Investors are in for a busy shortened week, with a slew of economic data due, including S&P Global manufacturing PMI and construction spending expected Tuesday, the Job Openings and Labor Turnover Survey on Wednesday and the December jobs report due Friday. On Wednesday, the Fed will also release minutes from its latest meeting.
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Opinions expressed by Entrepreneur contributors are their own.
After a volatile year in the stock market and concerns about a looming recession, it’s a good time to think about your investment strategy for next year. Obviously, you want it to be better.
StackCommerce
Rather than completely overhaul your financial outlook and change your fundamental principles, it’s better to augment and assist your investing strategy with a tool like Tykr Stock Screener. Until January 9, we’re offering a lifetime Pro subscription for the lowest price ever: just $94.99.
Tykr has earned 4.9/5-star ratings from Trustpilot and AppSumo because it makes investing fun again. The app’s rigorous algorithm works across 30,000 US and International stocks, analyzing data to identify the best stocks to add to your portfolio and help you maximize your gains in the market.
The stock screening platform is a one-stop-shop for everything you need to know, giving you a summary of every stock on the platform marking it as On Sale (potential buy), Watch, or Overpriced (potential sell). All of the work the algorithm does is open source so you can see the calculations it’s using to come to its conclusions and decide whether or not you want to follow the app’s lead. Every stock also has a score, giving you some more peace of mind when you make bigger investments.
In addition to stock screening, Tykr is also an education app, giving you all kinds of resources to increase your returns in the market. You’ll learn how to reduce risk, maximize your Margin of Safety, and lock in big gains in 2023.
Give your portfolio a big boost this coming year. Now through January 9 at 11:59 p.m. Pacific, you can get a lifetime Pro subscription to Tykr Stock Screener for 89% off $900 at just $94.99.
Prices subject to change.
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Tesla had a bad year 2022.
On the stock market, it was a real nightmare.
Tesla stock lost more than 65% of its value to end the year at $123.18. It had started 2022 at $352.26. This fall translates into more than $720 billion of market capitalization which have evaporated in one year, a real disaster for shareholders.
Elon Musk, the whimsical and charismatic CEO of the automaker attributed this stock market disaster to macroeconomic and geopolitical factors.
“Macro conditions are difficult: energy in Europe, real estate in China & crazy Fed rates in USA,” the billionaire explained on December 8.
Europe is going through an energy crisis due to the war between Russia and Ukraine, which is affecting economic activity. The Federal Reserve, or Fed, has been aggressively increasing interest rates for several months to crush inflation, which is at its highest in forty years. This monetary policy raises fears of a so-called hard landing for the economy, aka recession.
If the analysis of the Techno King is valid, many individual shareholders of Tesla (TSLA) – Get Free Report believe, however, that the stock market rout of the stock is due to the actions of the CEO following his acquisition of the social network Twitter.
“Elon has now erased $600 bil of tesla wealth and still nothing from the Tesla BOD. It’s wholly unacceptable,” lamented individual shareholder Ross Gerber on December 16.
This criticism caused a back and forth between him and Musk.
“Tesla is executing better than ever! We don’t control the Federal Reserve. That is the real problem here,” Musk responded.
But Gerber insisted: “I agree the Fed sucks big time and the macro is deteriorating. But tesla is doing super well and should be outperforming its tech peers like Apple… should have at least 2x apples PE. On a bad day tesla should be $250 a share.”
Three days later, faced with the continued fall in Tesla stock, Gerber asked the board to find a new CEO.
“Tesla stock price now reflects the value of having no CEO. Great job tesla BOD – Time for a shake up,” Gerber wrote on December 20.
The billionaire’s critics believe that Tesla’s rout is due to his acquisition of Twitter. The tech mogul decided to buy Twitter in order to, according to him, make the platform a place for free speech. Since making the takeover bid for the social network on April 22, the tech mogul has only been focused on Twitter.
He is omnipresent on the platform, attacks his perceived enemies and regularly creates controversy. The problem is that since the $44 billion bid for Twitter, Tesla’s stock has continued to fall. Musk finalized the deal on October 27, less than two months ago. Tesla’s stock lost nearly 39% of its value during this short period.
“In the past year, we have seen Tesla’s brand lose equity across every brand value, from foundational safety to refinement,” said research-based consultancy firm Strategic Vision President, Alexander Edwards. “These problems are magnified in that battery electric vehicles (BEVs) are more often purchased by self-identified Democrats who have generally opposed Musk’s actions with Twitter. It will become more difficult to sell Tesla vehicles as the narrative of Twitter makes the vehicles seem less fun and alienates the primary buyer.”
In this context, Dan Ives, star analyst at Wedbush and one of the most optimists on Tesla, believes that it is possible to get out of this negative spiral. He just listed 10 things Musk, who said he is stepping down as CEO of Twitter, needs to do in 2023 “to change negative sentiment around the Tesla story.”
”Name a CEO of Twitter by the end of January,” Ives recommended. “Stop selling stock and no more boy that cried wolf or Pinocchio situation,” and “formally adopt a 10b5-1 plan so investors know there is no major selling block around the corner as Musk sold roughly $40 billion of TlSA stock the past year.”
The analyst advises Musk to “lay out conservative 2023 delivery and targets given the darker macro. The 50% growth target is not happening in our opinion, with 35%* delivery growth a more hittable and realistic goal for 2023.”
The billionaire must also focus his attention back on Tesla because Musk is “the heart and lung of Tesla and vice versa,” Ives said.
”Announce Cybertruck deliveries will hit the road by the end of 2023. Timing is key here with competition from all angles and worries production woes will push this into 2024,” Ives suggested.
In addition, the analyst recommends some changes at the Board of Directors. The new additions should have experience around tech and EV leadership.
Tesla should also announce a share buyback program to regain the market’s confidence: “With the stock at these levels a no brainer strategic move in our opinion for Tesla given its massive treasure chest,” Ives defended, adding that the company should also be more transparent around its margin structure.
Finally, Ives said that Musk should be less political because “the more political on Twitter that Musk becomes is a bad thing for selling EV cars to the masses. Its that simple and this remains a key investor concern.”
”Lay out the strategic plan for Twitter,” the analyst wrote. “Right now very simply the fear is Twitter is bleeding money with advertisers fleeing (for now) which means more losses and therefore more Musk TSLA stock sales. Once a new CEO is in place lay out the 3-year strategy of Twitter and what this can become, Super App, ‘X’, WeChat 2.0, etc.”
The billionaire has yet to react to the analyst’s advice. However, it is a safe bet that he heard the message.
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