Elon Musk hits back at being blamed for Tesla cratering toward its worst year ever, says people are saving instead of buying stocks
- Elon Musk said Tuesday that Tesla is headed for its worst year ever because rising interest rates have made cash more attractive than stocks.
- Tesla shares have plummeted 38% since Musk finalized his Twitter takeover on October 27.
Elon Musk has fired back at claims that he's to blame for 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 account interest rates, which are guaranteed, start to approach stock market returns, which are not guaranteed, people will increasingly move their money out of stocks into cash, thus causing stocks to drop," the world's second-richest man tweeted Tuesday.
The Federal Reserve has raised interest rates from near-zero to around 4.5% this year in a bid to tame inflation, which is running close to forty-year highs.
That means that cash held in savings accounts now offers higher yields to investors, who may already be cautious about snapping up stocks in a year when the benchmark S&P 500 index has plummeted nearly 20%.
Rising interest rates also weigh on growth stocks like Tesla because borrowing becomes more expensive, chipping away at 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 Reserve," he said Monday. "That is the real problem here."
But shareholders are worried that Twitter, which Musk acquired for $44 billion on October 27, has become a costly distraction for the Tesla and SpaceX chief.
Tesla shares have plummeted 38% since Musk finalized his takeover of the social-media company – with the tech-heavy Nasdaq index down just 2% over the same period.
Musk was responding to longtime Tesla bull Ross Gerber, who tweeted earlier on Tuesday that the company's current share price "reflects the value of having no CEO".