FOLLOW US

Elon Musk has replied to claims that he's the reason behind Tesla's share price sharp decline this year – saying that soaring interest rates have sparked a broader market sell-off by making cash more attractive than stocks.

"In simple terms: as bank savings account interest rates, which are guaranteed, start to approach stock market returns, which are not guaranteed, people will increasingly move their money out of stocks into cash, thus causing stocks to drop," the world's second-richest man tweeted Tuesday.

The Federal Reserve has hiked interest rates from near-zero to around 4.5% this year in a bid to control inflation, which is surging to forty-year highs.

That means that cash held in savings accounts now offers higher yields to investors, who may already be cautious about snapping up stocks in a year when the benchmark S&P 500 index has dipped nearly 20%.

Rising interest rates also wreak havoc on growth stocks like Tesla because borrowing is more expensive, dashing the company's future cash flows.

Musk has consistently blamed the Fed for Tesla's poor performance in 2022 when shares slumped 61% – putting the EV manufacturer on track for its worst year ever.

"We don't control the Federal Reserve," he said Monday. "That is the real problem here."

But shareholders are worried that Twitter, which Musk acquired for $44 billion on October 27, has become a costly distraction for the Tesla and SpaceX chief.

Tesla shares have plunged 38% since Musk finalized his takeover of the social-media company – with the tech-heavy Nasdaq index down just 2% over the same period.

Musk was responding to longtime Tesla bull Ross Gerber, who tweeted earlier on Tuesday that the company's current share price "reflects the value of having no CEO".