What a fortnight it’s been in the stock market. The S&P 500 had its worst day since 2020, then its best week since 2023. But investors should pay attention to Tesla (NASDAQ:TSLA) shares.
After all that volatility, a £10,000 investment in the stock two weeks ago is now worth… £9,733. It’s almost as though nothing happened – but it hasn’t felt that way.
Share price movements
A £10,000 investment in Tesla from 31 March has taken quite the scenic route to go almost nowhere. To start with, ‘Liberation Day’ tariff announcements sent the stock down almost 22%.
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Shortly afterward, news of a 90-day window for trade negotiations saw the stock bounce back to above where it was two weeks ago. And since then, it’s settled just below that level.
The volatility has been extreme and very difficult to predict. But investors who were able to keep cool heads have found that things have turned out just fine. This is often the way with the stock market. Share prices move up and down, but if nothing major changes with the underlying business, things tend to work themselves out over time.
Businesses vs stocks
From an investment perspective, I don’t think anything much has changed with Tesla. As I see it, everything hinges on the company’s ability to launch and scale its robotaxi business. The biggest obstacle to this is regulation. But the company’s ability to overcome this doesn’t – in my view – have anything to do with the tariff news that has been moving the share price.
That’s not to say Tesla is entirely unaffected by higher import costs. If this leads to inflation, US consumer spending could come under pressure and this won’t be good for car sales.
From an investment perspective though, I don’t think this is the most important thing. It’s very hard to see how car sales justify the current market-cap – it comes down to robotaxis.
An investing lesson
The last couple of weeks have presented an important lesson for investors. When the Tesla share price fell 22%, it must have been tempting to sell in case it went any lower. This however, would have been a mistake. Not just because the stock bounced back to recover its losses, but because not much had changed with the underlying business.
Tesla’s share price over the last fortnight is an unusually extreme example, but almost all stocks fall sharply at some point or other. The best ones however, recover. It’s a general feature of the stock market that the best days often follow hot on the heels of the worst ones. Investors need to try and make sure they’re in a position to benefit.
Stock market volatility
Staying the course isn’t always straightforward. For various reasons, both institutions and individuals can find themselves having to sell stocks when prices are low. Investors however, give themselves the best chance by being able to hold onto stocks for the long term. Over time, shares in quality companies tend to overcome sudden downturns.
Tesla’s share price is an extreme example. But it’s one that investors should pay attention to when thinking about how to do well by investing in the stock market.
