- Tesla CEO Elon Musk warned of a recession in the corporate’s fourth-quarter earnings update.
- But investors shouldn’t fret about his outlook, in response to The Future Fund co-founder Gary Black.
- Any economic downturn will likely be shallow since the Federal Reserve can cut rates of interest every time it wants, Black said Thursday.
Elon Musk’s strengths lie in developing electric cars – but investors are unlikely to pay much attention to his recent warning that the US economy could slip right into a deep recession this 12 months, in response to longtime Tesla bull Gary Black.
“I do not think investors hearken to Elon’s economic forecasts,” the Future Fund managing partner told Yahoo Finance Thursday. “I believe he’s viewed as an incredible engineer, an incredible product guy, a visionary about climate change and accelerating the world’s transition to a sustainable world – but he is not an economic forecaster.”
Musk alluded to the concept of a severe recession on Tesla’s fourth-quarter earnings call, which took place after Wednesday’s bell.
He said a downturn could actually help the Tesla’s stock price because it might be disinflationary – helping to scale back the corporate’s input costs.
But Black doesn’t consider investors will take much notice of Musk’s economic predictions. He said that even when there is a recession it’s prone to be shallow, since the Federal Reserve has scope to chop rates of interest.
The central bank raised the associated fee of borrowing from near-zero to around 4.5% last 12 months – and plenty of investors think it’ll start slashing in some unspecified time in the future in 2023 to support economic growth.
“Most individuals, including myself, consider if we have now a recession, it is going to be extremely shallow since the Fed can cut rates any time, and so they probably will,” Black said. “So I do not think individuals are buying into the concept that there’s going to be a recession.”
Tesla stock rallied just below 11% Thursday after the corporate beat Wall Street’s fourth-quarter earnings targets.
Musk attributed Tesla’s earnings-per-share outperformance to recent US price cuts of between 7% and 20% for a few of the company’s flagship vehicles, which has helped to revive previously faltering demand.
And Thursday’s rally demonstrates the worth cuts have worked, in response to Black.
“The conference call was pretty successful, he said. “Elon got on there and showed loads of confidence and said the January orders were about twice what production is.”
“And that is what’s pushing the replenish 10% today was really the outlook on the amount side, which was a results of cutting the worth about three weeks ago now,” Black added.
Read more: Elon Musk is gung-ho on Tesla sales hitting 2 million after price cuts, but a Wedbush analyst says it’s having to ‘sacrifice margins for volumes’