Tesla is falling because people are saving, not buying stocks, says Elon Musk

• Tuesday’s comments by Elon Musk were a warning that Tesla is heading towards its worst year in history. This is because of the rising interest rates, which have made cash more appealing than stocks.
• Tesla shares fell 38% after Musk announced his Twitter takeover.
• Over the same period, the tech-heavy Nasdaq index fell 2%.

Elon Musk rebutted claims that he was to blame. Tesla‘s share price cratering this year – saying that rising interest rates have fueled a broader market sell-off by making cash more attractive than stocks.

“In simple terms, as bank savings rates, which are guaranteed and stock market returns, start approaching stock market returns which are not guaranteed,” the world’s 2nd-richest man. tweeted Tuesday.

The Federal Reserve raised interest rates by nearly zero to 4.5% in an effort to curb inflation, which is at its highest point in 40 years.

This means that cash in savings accounts offers investors higher yields. Investors who are already cautious about investing in stocks in the next year may be more cautious. S&P 500Index has fallen nearly 20%

Rising interest rates can also be a burden on growth stocks such as Tesla because borrowing becomes more costly and reduces the company’s future cash flows.

Musk has repeatedly blamed the Fed for Tesla’s poor performance in 2022, when shares have cratered 61% – putting the EV manufacturer on course for its worst year ever.

“We don’t control the Federal ReserveHe said Monday. “That’s the real problem here.”

But shareholders are concerned that Musk’s purchase of Twitter, valued at $44 billion, has become a distraction for SpaceX and Tesla chiefs.

Tesla shares have plummeted 38% since Musk finalized his takeover of the social-media company – with the tech-heavy NasdaqIndex fell just 2% in the same period.

Musk was responding to Ross Gerber (longtime Tesla bull), who tweeted Tuesday that Tesla’s current share price was “…”reflects the value of having no CEO“.

Continue reading: Elon Musk blames Tesla’s $600 billion plunge in market value this year on the Fed – as rising interest rates erode the appeal of stocks