#What You Need To Know
As President Trump defeated Kamala Harris to win the 2024 presidential election, Tesla's stock rose significantly, gaining up to 15% in pre-market trading, partly due to Donald Trump's proposal to appoint Elon Musk to a role that could influence government spending decisions.
This potential position may positively affect Tesla's operations and overall profitability. Recently, Musk contributed nearly $75 million to the America PAC, which he created to support the Republican nominee. Trump has promised to establish a government efficiency commission led by Musk if elected.
At a Trump rally in late October, Musk asserted his capability to cut the federal budget by $2 trillion. However, some analysts, like Dan Ives from Wedbush Securities, caution that a Trump presidency might adversely impact the electric vehicle (EV) sector due to potential cuts in EV rebates and tax incentives. Despite this, Ives notes that Tesla's significant scale could provide a competitive advantage in an environment with fewer subsidies and possibly high tariffs against Chinese EV brands, which could further benefit Tesla's market position.
#Why This Is Important for Retail Investors
Stock Momentum: Tesla's 15% pre-market gain reflects increased investor confidence, potentially translating into higher returns and stock valuation stability.
Government Influence Potential: Musk’s possible government role under Trump could drive favorable federal policies or spending decisions, which might indirectly benefit Tesla’s operational growth and profitability.
Market Position in Subsidy-Free Environment: Tesla’s scale and dominance provide resilience against potential cuts in EV tax incentives, positioning it well to capture market share even if government rebates for EVs diminish.
Protection Against Foreign Competition: Possible tariffs against Chinese EV brands could reduce foreign competition, strengthening Tesla's market share and profitability within the U.S. market.
Cost Efficiency Narrative: Musk's claim to reduce federal spending by $2 trillion could further elevate his influence, appealing to fiscal conservatives and potentially leading to cost-saving measures that benefit companies aligned with such efficiency goals.
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