Tesla’s Margins Face Headwinds
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A lot of people are starting to look at their calendars, but is that where long-term investors should be focused? This is Motley Fool Money. Welcome to Motley Fool Money. My name is Jon Quast. I'm joined today just by Matt Frankel, my colleague and contributor, longtime Fool contributor. And we are looking at several things today. We're looking at some stocks on our radar. We're going to talk some Tesla earnings. But first up, we're going to start hearing some of these calendar terms in investing in coming weeks and months. And Matt and I just want to start to cut through some of the noise that you may start to hear. investment decisions based on the calendar. And we'll talk more about that in just a moment.
But we want to start off here by talking about some terms. And so one of the terms you may start hearing is tax loss harvesting. We're entering into tax loss harvesting season. Matt, what is tax loss harvesting? And why do people start talking about it right now?
Yeah, so tax loss harvesting is the thing we're gonna talk about that's not really noise. It's a legitimate investment concept. It means selling positions at a loss with the specific goal of using that loss to then lower your tax liability. Now, this can be used to offset a capital gain from a stock you sold or just to lower your taxable income. You can use up to $3,000 of losses per year to offset the rest of your taxable income. But the important thing you got to keep in mind, and honestly, this is the topic we could spend an entire episode of this on, is that it's not a great idea to sell just because you want a tax break if you're still interested in owning the stock otherwise.
Yeah, I think that's such a great point to make, Matt, because one of the things that we understand about stock market investing is if you're invested in an individual stock, what can happen in a single year is it can be quite volatile. You can be up profoundly or you can be down very despairingly. And we really don't want to judge an investment success or failure based on just a few months. So it can be tempting sometimes to buy into a stock we believe in for the long term. be tempted to sell it after just a couple of months of poor performance to get that tax loss, you're saying maybe not the best strategy there. But if you're ready to move on from something.
No. I mean, if it's a stock that you're like on the fence about selling and could use the loss for your taxes, then go for it. But if it's something that you like that just went down, it's not worth selling just to get a tax break.
Well, thank you for that. And before we move on, there's so many other calendar related things that we can hit. Tax loss harvesting right now, people are thinking about taxes at the end of the year, but there are so many other things we could talk about. We could talk about the January effect, the October But I just picked out one more here. The Santa Claus rally and the January barometer. These are some terms that people might start hearing in the next six weeks or so. These are other calendar effects.
What are these two about? Yeah, and these are just rules of thumb, and they work until they don't. There's another one you didn't mention called sell in May and go away. The market tends to have a weaker summer than during the busy winter season. But the Santa Claus rally that you're talking about refers to the historically strong performance of the stock market during the last five days of December and the first two days of January of the trading year. So since 1950, the stock market has risen 79% of years in this period, and by an average of 1.3%, which is a pretty big move in a seven-day period. It's often considered to be a bad sign by investors if the market doesn't produce the Santa Claus rally.
And similarly, the January barometer, it's a common belief that if the market gains in January, it's a good indicator that it's going to gain for the full year. I mean, some of this is just the market's upside bias over time, but whether the market rises in January or not has accurately predicted a positive or negative full year return 85% of the time since 1950.
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