$1,000 In Tesla Or SPY At Start Of 2023: Which Investment Has Given Better Returns?

Zinger Key Points
  • Tesla's stock rally this year reflects improvement in both fundamentals and the broader market sentiment.
  • The stock could see a spike going into the March 1 Investor Day.

Green shoots of recovery have been evident in the financial market since the start of 2023, marking a reversal in the dismal sentiment seen for much of the previous year.

Jerome Powell’s Dovishness Helps: The Federal Reserve’s aggressive rate hikes that began in March 2022 amid galloping inflation, fears concerning an economic recession and geopolitical tensions all worked in unison to stifle risk appetite in the past year.

See Also: Everything You Need To Know About Tesla Stock

After a string of aggressive fed funds rate hikes, the central bank appears to have toned down its hawkish stance. Although the messaging from Fed officials does not preclude more hikes down the line, Powell has relented by suggesting that the Fed will take a look at the cumulative impact of the rate hikes.

The stock market has taken this as a cue toward a potential pause in the second half of the year or even a pivot. At the end of 2022, not many analysts were confident of a market recovery, premising their view on the specter of at least a modest recession in 2023.

Capitalizing on the revival in risk appetite, big techs that led the market downturn in 2022 began to rally. Tesla Inc. TSLA is among the best-performing mega-cap stocks so far this year.

Tesla Powered Up: The strength in Tesla’s shares reflects both the broader market recovery and fundamental improvement. Belying expectations for a dismal fourth quarter, the Elon Musk-led company’s results were fairly encouraging. The billionaire’s upbeat commentary on the earnings call gave rise to hopes for better times ahead.

Following Tesla’s string of price cuts across geographies since late-2022, analysts are hopeful of volumes ramping up. They also see the need for competition to adjust prices downwards or risk losing market share.

After clocking a 65% loss in 2022, Tesla started the year on the back foot as the stock plunged to a more than two-year low of $104.64 on Jan. 3. The stock was reacting to the company’s deliveries miss for the fourth quarter. A nice recovery has followed since then.

Returns From Tesla Vs. SPY: A $1,000 invested in Tesla at the 2022 closing price of $123.18 would have fetched an investor 8.1 shares. The same would be worth roughly $1,598, a return of about 60% over a little over a month.

The same $1,000, had it been invested in the SPDR S&P 500 ETF Trust SPY, would have fetched 2.6 units of the exchange-traded fund. This would be worth $1,086 at Tuesday’s closing price of $415.19, representing a potential return of 8.6%.

Read Next: What's Next After Tesla's 58% YTD Rally? Analyst Expects This Key Event To Bring More Upside

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Posted In: Long IdeasNewsEducationTop StoriesFederal ReserveTrading IdeasGeneralElon MuskFed rate hikeInflationJerome PowellRecession
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