Prediction: Tesla Stock Will Plunge to $100 if the S&P 500 Enters a Bear Market
Key PointsThe S&P 500 last traded in bear territory during 2022 and 2023, sparking a 75% peak-to-trough decline in Tesla stock.
The S&P 500 stock market index recently traded in bear territory during 2022 and 2023, due to persistently high inflation prompting the U.S. Federal Reserve to raise interest rates aggressively. The index may enter a similar situation in the near future as soaring oil prices are reigniting inflation, leading the Fed to raise rates at its recent September meeting.
The S&P 500's Schiller Cyclically Adjusted Price-to-Earnings (CA) ratio stands at 41.2, marking its second highest valuation since the dot-com bubble peak in 2000. This high valuation suggests a potential severe downturn if headwinds like higher interest rates negatively affect the economy and investor sentiment. The last time the S&P 500 entered bear territory, Tesla's stock plummeted by 75% from its peak, trading as low as $108.
With Tesla's shrinking earnings over the past couple of years, the reporter predicts an even sharper decline if the S&P enters another bear market.
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