Source: Yahoo Finance

Not That Bad Sales

Tesla has been one of the most influential companies for a long time. However, with the rise of other electric vehicle companies, particularly in China, Tesla's stock has been declining since 2022. Recently, the paradigm may have shifted. In three days, Tesla's stock gained 20%, despite declining sales. Tesla delivered nearly 445,000 vehicles in the second quarter of 2024, 4.8% fewer than a year earlier but 14.8% more than the preceding quarter. Analysts expected higher decline in yearly comparison. The number of produced cars was 411,000.

The full report will be published on July 23rd, after market hours. Further details could either boost or drag down the stock price again.

Current Market Valuation

The second quarter of 2024 has seen more complicated developments than the first. In the first quarter, stocks rallied on expectations of lower interest rates by June. When this scenario was dismissed due to persistent inflation, the markets took a serious hit, most notably in April, affecting both the S&P 500 and Nasdaq indexes. Additionally, a significant correction in Nvidia’s price suggests that the stock market is currently reasonably priced.

Given this context, Tesla's recent performance deserves another look. The stock's price jump, despite "not-so-great" results, indicates that it might have been undervalued. If this pattern holds for the entire market, it suggests that lowered interest rates could spur a market-wide rally without causing overvaluation.

The Effect of Lowered Interest Rates

This anticipated rally will be fueled by two important factors: investors' current caution regarding negative economic factors preventing bubble creation and the market's expectation of a more favorable climate following the disappointment over delayed interest rate cuts.

With these points in mind, we see a rally in both major indices. However, this growth reflects individual stock increases, which will be amplified by structural changes in the market. Thus, either reduced inflation or a confirmed date for the first-rate decrease will likely trigger the long-expected and possibly significant market rally.