Tesla's Angry Mob, Davos Getting Ghosted, and... Inflation | This Week on Wall Street

Tesla's Angry Mob, Davos Getting Ghosted, and... Inflation | This Week on Wall Street

I'm here to demystify the biggest headlines of the week and teach you how the current news cycle will affect your finances. Let's get into it!

Elon Musk Did What?!

On Thursday Tesla cut prices on its cars. If you’re looking to buy a Tesla this is great news; not only will you be paying less, but the lower price means that the cars are eligible for more tax credits. Between the slashed price and the tax credit, the price of some vehicles has been lowered by as much as 30%. But if you just bought a Tesla, this move has to sting. Tesla also slashed prices in the Chinese market and owners there were so outraged that they actually staged a small protest over it.

This all stems from the fact that Tesla is facing new challenges around trying to stay competitive in the electric vehicle (EV) market. When Elon Musk first launched his brand, he was a pioneer. That’s no longer the case as EVs have become more mainstream. While the EV market has evolved, Tesla’s car lineup... kinda hasn’t. On Friday, after a drop at open, Tesla’s stock price closed close to its previous day price. This week will determine if investors believe these price cuts will stimulate enough sales to make up the loss in revenue or if the Tesla stock price will continue its long slow slide from its peak back in November of 2021.

Inflation... Again

How did I know you wanted to hear more about inflation?!

Last week the CPI numbers came out; these are the U.S. government’s official measurement of inflation. The new numbers are part of a very slow downward trend as the government works to curb inflation. The CPI dropped from 7.1 percent in November to 6.5 percent in December. The current drop is due to a decrease in fuel and airline ticket prices. Since both of those are factors in shipping costs, they have a much larger impact on inflation than say, the cost of milk. If you pull out the cost of fuel and food you get a number called the "core CPI." That number dropped from 6 percent to 5.7 percent. Again, not a huge drop. Inflation is still growing, but at a slower rate.

Davos Getting Ghosted

There’s more good news about inflation. This week the World Economic Forum meets in Davos; it's a huddle where a bunch of world leaders and predominantly male bankers meet in Switzerland to try to save the world. This year the theme is “Cooperation in a Fragmented World," which I think is a little more on the nose than they originally intended.

Davos used to be a place of financial diplomacy. Traditionally the sitting American president and other world leaders attended. But those names are noticeably absent this year. Biden isn’t going and neither is Xi Jinping, President of China. Also skipping the affair is the UK Prime Minister Rishi Sunak, the Prime Minister of India Narendra Modi, and President of France Emmanuel Macron. These are some heavy hitters who would have attended in past years. The question is: has Davos lost its charm? Or has globalization so fallen out of favor that world leaders don’t want to be seen attending a booster rally for it?

However, what gets said at Davos still carries a lot of weight. And early reports suggest a more optimistic outlook for the global economy than what we’ve been hearing in recent months. Most speakers are speculating that China relaxing its covid policy will help ease those supply chain shortages that have been driving up prices for the last few years.

Raise the Roof (Please?)

The U.S. government also finds itself facing uncertainty this week. Last week, Treasury Secretary Janet Yellen announced that the U.S. could hit its credit limit as early as this Thursday. Now, Yellen and the treasury have a little wiggle room here to move money around and keep this from happening. The U.S. hit the debt ceiling in 2011 and our national credit score still hasn’t recovered. Not only that but the markets fell and it took months to recover.

We can also look forward to some housing numbers this week. Thursday we will get building permits and housing starts, and finally, on Friday we get existing home sales. These numbers have not been great if you’re looking to buy a home. While interest rates have been hammering prospective buyers, there just aren’t enough homes on the market to meet the demand. This leads to a situation where housing prices, especially in high-demand areas have stayed high despite the mortgage rates. Typically, housing prices and mortgage rates are like a seesaw: when one goes up, the other goes down. However, because mortgage rates are rising, and housing prices are still high in many areas, we're not seeing our beloved seesaw. In fact, there's not a lot of fun and games going on in this housing market.

xo,