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NIO Stock Is Down 50% in 2022. Investors Are Waiting on a Fed Pivot

  • Nio (NIO) has performed terribly this year, with NIO stock down 7% today and more than 50% so far in 2022.
  • Investors are hoping for a Fed pivot, which could help spur “risk-on” assets higher as the Fed becomes more dovish (or at least less hawkish).
  • However, the Fed does not seem to be on the verge of a pivot, as Fed members remain fairly steadfast with plans.
Nio (NIO) electric vehicle model in a soft blue color
Source: xiaorui / Shutterstock.com

It’s not a good day for Chinese electric vehicle (EV) stocks like Nio (NYSE:NIO). Shares of NIO stock are down 7% so far today. However, Nio isn’t the only one under pressure. Both Li Auto (NASDAQ:LI) and Xpeng (NYSE:XPEV) are also down on the day, respectively lower by about 13% and 4%.

In fact, it has been quite a volatile week for EV stocks at large. For example, Tesla (NASDAQ:TSLA) continues to swoon amid headlines related to CEO Elon Musk. Meanwhile, delivery results from other automakers continue to pour in.

That said, it’s not just a day or a week weighing on NIO stock — it has underperformed all year long. Nio is down more than 50% so far in 2022, roughly double the losses that we’ve seen in the S&P 500 and Nasdaq.

Investors were hoping that this was about to come to an end earlier this week. On Oct. 1, Nio reported record delivery results, sending shares higher on Monday. That said, production climbed just 1.9% month-over-month and 2.4% year-over-year (YOY).

A few days later and NIO stock is trading at its lowest level since May.

What Does the Fed Have to Do With Nio Stock?

Now some investors may be wondering about this article’s headline. At first, Nio being down more than 50% and investors waiting on a Fed pivot may seem like two completely different topics. In a sense, they are. However, the correlation between the two is actually quite clear.

The Federal Reserve has embarked on a rate-hiking spree over the last two quarters and the agency continues to tighten its fiscal policy. Bulls like a dovish stance from the Fed, not a hawkish stance like it has right now.

Due to issues in Europe, we’ve seen some other central banks around the world start to flinch. In the financial world, they call that a “pivot.” Because other central banks are starting to loosen up, investors are now hoping the Fed will also consider a pivot.

However, based on the recent commentary from various Fed members, a pivot doesn’t seem to be on the table just yet.

If or when the Fed pivots, however, it should open the door for “risk-on” assets like NIO stock. These stocks tend to do much better when the Fed is easing instead of tightening (or dovish instead of hawkish).

“Don’t fight the Fed” is a Wall Street saying for a reason. Investors can see just how poorly these names have performed since the Fed began its tightening. Specifically, growth stocks could have some serious upside if the Fed pivots. But if not, NIO stock and others will remain vulnerable to the swoons of the broader stock market.

On the date of publication, Bret Kenwell did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

Article printed from InvestorPlace Media, https://investorplace.com/2022/10/nio-stock-is-down-50-in-2022-investors-are-waiting-on-a-fed-pivot/.

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