Tesla Shows Stock Valuations, Consumers Are Stretched. Here’s the Silver Lining for Markets.
Oct 08, 2025 06:26:00 -0400 | #Markets #The Barron's Daily
Model Y Standard (Courtesy Tesla)
It’s not just stock market valuations that are looking stretched—U.S. consumers are, too.
Tesla unveiled cheaper versions of its Model Y and Model 3 vehicles Tuesday after sending investors into a frenzy with several cryptic posts to start the week. The shares fell 4.5% after surging 5.5% in the previous session. The announcement came just days after the $7,500 federal electric-vehicle tax credit expired on Sept.30.
While that’s not a tariff, it performs the same function. Tesla opted not to entirely pass the cost increase on to the consumer, instead offering a more affordable alternative.
That same conundrum is being faced by companies across the U.S.—and earnings season, which starts in earnest later this week, will reveal how Corporate America is trying to solve it. There are growing signs that consumers may not be able to absorb price hikes, and companies may have to take the pain.
Friday’s University of Michigan consumer sentiment index is expected to show a third consecutive monthly drop. That’s after September’s consumer confidence reading fell to its lowest level since April last week amid fears over a weakening labor market.
Jobs growth also looks to be slowing further, according to numbers from Bank of America and Carlyle—such private data have more significance in the absence of official figures delayed by the ongoing government shutdown.
All of that means the Federal Reserve may feel comfortable cutting interest rates again in October—even if there is a dearth of labor and inflation reports ahead of its next meeting. It supports the central bank’s view that inflation won’t be a problem, despite President Donald Trump’s wide-ranging global tariffs, as consumers struggle.
With markets near record highs, further rate cuts will boost stocks as an uncertain earnings season puts pressure on this fragile rally.
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Tesla’s Big Dramatic Reveal: Two Lower-Cost Models
Tesla rolled out a pair of new vehicles starting below $40,000 in the U.S., a price that could open up more of the auto market to the electric-vehicle maker and help offset the expiration of a $7,500 federal tax credit that had juiced third-quarter sales.
- Its new Model Y starts at $39,900 and a new Model 3 starts at $36,900. The $35,000 level is important for Tesla CEO Elon Musk, who has referenced it since 2013. In 2019 Tesla offered a Model 3 with reduced range at that price but has discontinued it.
- But while two lower-priced vehicles are good news for potential buyers, two different versions of existing models may not be good for Tesla’s sales numbers. It means there aren’t any new cars for buyers to consider, and the risk is that the cheaper versions will become the default options.
- Musk has acknowledged the affordability issue. In July when executives teased new low-price models, he said the goal was to reach buyers who couldn’t otherwise afford a Tesla even if they really wanted one. The latest offerings could help Tesla compete better against lower-cost Chinese EVs.
- Tesla bull and Wedbush analyst Dan Ives was less enthusiastic. The new models could help put Tesla in better position to reach a 500,000 quarterly deliveries run rate, but he said he was disappointed with this announcement because the prices are only $5,000 lower than prior models.
What’s Next: The new models don’t appear to have the glass roof. They have fewer color options, lower-end audio options, and a lower per-charge range. There is also the cloth textile interior, versus Tesla’s premium microsuede offerings. They are expected to hit the market in the current quarter, Ives said.
— Al Root and Liz Moyer
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Air Travel Delays Ramp Up As Government Shutdown Continues
The government shutdown threatens to upend travel for millions of Americans using the nation’s airports, as officials acknowledge that federal workers who must show up to their jobs despite not being paid until the shutdown is over are starting to call in sick. Flight delays are piling up.
- The aviation industry was already coping with a shortage of air-traffic controllers and other federal airport workers. Transportation Secretary Sean Duffy told reporters this week that there’s been an uptick in sick calls by airport workers, and he warned of possible delays.
- More than 3,000 flights within, into, or out of the U.S. were delayed as of early Tuesday evening and steadily rising, according to data on the flight-tracking site FlightAware.com. That comes after 6,154 flights were delayed on Monday, and 5,234 on Sunday.
- Joe Shuker, vice president of the America Federal Government Employees Council 100/TSA Region 7, told MSNBC over the weekend that workers are having to stretch their last paychecks as the shutdown drags on and said “it’s very likely” that some are calling out sick.
- Burbank, Calif.’s, airport near Los Angeles was without any air-traffic controllers for several hours on Monday night. “Thanks, @realDonaldTrump!” Gov. Gavin Newsom said on X. “Burbank Airport has ZERO air-traffic controllers from 4:15pm to 10pm today because of YOUR government shutdown.”
What’s Next: The National Air Traffic Controllers Association, the union representing nearly 20,000 air-traffic controllers and others, told members it was aware of the political climate and urged them to avoid any actions that could reflect poorly on the industry.
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Activists Say Wells Fargo Should Keep Independent Board Chair
A small activist shareholder group is urging Wells Fargo to restore a corporate bylaw that requires an independent board chair, reviving a long-running corporate governance debate about a company’s CEO also serving as chair of the board.
- The nonprofit Accountability Board said that having an independent chair “fosters greater accountability and allows the chair to focus on the critical issues of governance and risk oversight while the CEO focuses on the day-to-day business,” according to the proposal seen by Barron’s.
- Wells Fargo in July announced plans to name CEO Charlie Scharf as chairman and award him $30 million in a payment to retain him for six more years. The board updated its corporate governance guidelines to require a lead independent director when the board chair isn’t independent.
- Those changes came a month after regulators lifted the unprecedented growth limitation Wells had operated under since 2018, a punishment stemming from its fake-accounts scandal, including amending its bylaws in late 2016 and separating the roles.
- Matt Prescott, Accountability Board president and chief operating officer, compared independent board chairs to seat belts, saying: “It’s easy to think you might not need one, but you’re sure glad it’s there when the road gets bumpy.” A Wells Fargo spokeswoman declined to comment.
What’s Next: Accountability Board has filed corporate governance proposals at Target and UnitedHealth Group, and plans to file proposals at other companies in its portfolio for the 2026 or 2027 proxy seasons. It holds stakes in Bank of America, Synchrony Financial, Raymond James, Bank of Nova Scotia, and Ally Financial.
— Rebecca Ungarino and Janet H. Cho
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NYSE’s Parent Invests in Prediction Market Amid Regulatory Thaw
The owner of the New York Stock Exchange is investing up to $2 billion in Polymarket, the prediction-market operator, amid rising interest in betting money on the outcome of events. Only three years ago, Polymarket barred U.S.-based users because of regulatory scrutiny. Things are different under the Trump administration.
- Regulators have taken a softer stance toward prediction markets lately. Polymarket CEO Shayne Coplan recently said in a social media post the Commodity Futures Trading Commission had allowed it to return to the U.S. A statement on the site said trading will “soon be available for US traders.”
- The cash deal values Polymarket around $8 billion. Intercontinental Exchange, the NYSE parent, will become the global distributor of Polymarket’s event data, providing customers like traders and stockbrokers with “sentiment indicators” from Polymarket users. It isn’t expected to affect ICE’s 2025 financials.
- The companies also agreed to work together on future initiatives around tokenization, which refers to digitizing equities so they can trade over blockchain technology rather than traditional exchanges. Back in 2022, the CFTC reached a settlement with Polymarket after calling it an unregistered exchange.
- President Donald Trump’s son, Donald Trump Jr., is an advisor to Polymarket, in which his venture-capital firm recently invested. Multiple media outlets reported in June that Polymarket was nearing a $200 million funding round led by Peter Thiel’s Founders Fund.
What’s Next: Polymarket and rival Kalshi are seen elbowing in on sports betting market operators DraftKings and Flutter, which owns FanDuel. This year, Kalshi began offering event contracts based on the outcome of sporting events. It has since added related contracts like total runs scored in a baseball game.
— Nate Wolf and Nick Devor
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Dear Quentin,
My wife and I are in our early 40s. She has a Roth with $85,000; I have no retirement savings. We’re a few months away from paying away all high-interest debt, and when that happens, we’ll be focusing on retirement savings and/or investing.
I’m unsure whether or not I should open up an IRA, just because I feel like I’m entering the game a little too late and the magic of compounding interest wouldn’t happen at this point. Would it still make sense to start a retirement account, or should I just do the regular brokerage account, buy into the S&P 500 and keep things liquid?
Or should we be laser-focused on maxing my wife’s Roth, and dump any extra into savings/investing? Historically, we’ve been keeping the contribution to her Roth at $50-$200 a month, depending on our situation at the time while paying off our debt.
What suggestions do you have?
— The 40-Something Husband
Read the Moneyist’s response here.
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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner