General Motors stock has rallied by almost 20% over the last month (about 21 trading days) and also remains up by about 5% over the last week. This compares to the broader S&P 500 which was up by about 11% over the last month. There are a couple of factors driving the recent outperformance. Although GM’s Q2 2022 earnings were weaker than anticipated, with adjusted EPS coming in at $1.14, down from $1.97 as supply chain challenges continued to weigh on the company’s cost base and shipments, revenue beat estimates, coming in at $35.8 billion, up about 4.5% compared to last year. Moreover, investors were pleased with the fact that GM maintained its previous earnings guidance for the full year, noting that it intends to scale up production in the second half. Separately, there might be macro factors at play, as well. U.S. GDP has contracted over the last two quarters and U.S. inflation has cooled off a bit to about 8.5% for July. This could cause the Federal Reserve to go a bit easier on its rate hikes, potentially helping rate-sensitive sectors such as automotive.
However, now that GM stock has seen a gain of about 20% over the last month, will it continue its upward trajectory in the near term, or is a decline imminent? Going by historical performance, there is only a 39% chance of a rise in GM stock over the next month. Out of 75 instances in the last ten years that GM stock saw a twenty-one-day rise of 6% or more, 29 of them resulted in the stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 29 out of 75, or a 39% chance of a rise in GM stock over the coming month, implying a negative near-term outlook for the stock. See our analysis on GM Stock Chance of A Rise for more details.
Calculation of ‘Event Probability’ and ‘Chance of Rise’ using last ten years data
- After moving 5% or more over five days, the stock rose in the next five days on 52% of the occasions.
- After moving 7.2% or more over ten days, the stock rose in the next ten days on 49% of the occasions
- After moving 20% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 39% of the occasions.
With inflation rising and the Fed raising interest rates, GM has fallen 33% this year. Can it drop more? See how low can GM stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||4%||-10%||92%|
|Trefis Multi-Strategy Portfolio||8%||-7%||268%|
 Month-to-date and year-to-date as of 8/16/2022
 Cumulative total returns since the end of 2016