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Why General Motors Stock Lost 14% Last Month

By Jeremy Bowman – Jun 11, 2019 at 1:10PM

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Shares of the automaker fell on concerns about trade tensions and resistance to its AV ridesharing launch.

What happened

Shares of General Motors (GM 0.41%) headed lower last month after the automaker faced regulatory headwinds and dealt with President Donald Trump's now-dashed plans to impose tariffs on Mexico, a key auto supplier. According to S&P Global Market Intelligence, the stock finished the month down 14%.

As the chart below shows, much of the stock's slide came in the second half of the month on a few distinct news items.

GM Chart

GM data by YCharts

So what

General Motors shares mostly traded lower with the broad market over the first half of the month as rising trade tensions between the U.S. and China pushed stocks lower. On May 13, auto stocks took a hit, with GM falling 3.5% as fears built that tariffs on autos and auto parts could be hiked as the trade war heats up. China is not only the world's biggest auto market, but also GM's biggest market, so the company would feel the impact of an intensifying trade war as well as a potential backlash against American brands in China.   

A car outside the GM Bowling Green plant

Image source: General Motors.

On May 22, the stock fell again, dipping 4.3%, as the company faced challenges in its plans to deploy its highly anticipated self-driving ridesharing service later this year. GM had requested a temporary waiver from the National Highway Traffic Safety Administration on features like mirrors and turn signals that are standard on human-driven vehicles; however, a group including car dealers, insurance companies, and others that stand to lose from AVs demanded that the NHTSA request more data before granting the waiver.  The response indicates that GM is likely to face challenges as it aims to launch the service in San Francisco by the end of the year.

Finally, on the last day of the month, the stock lost 4.2% as Trump threatened to impose tariffs on Mexico, potentially undermining a key auto supplier for American car manufacturers like GM.

Now what 

GM stock has come roaring back in June along with the broader stock market as Trump has dropped his threats to initiate import taxes on Mexico, and investors have propped up stocks after dovish words from the Federal Reserve about lowering rates if the economy slows. As of June 11, GM stock is up 10%, recouping most of its losses from last month.

The swings should be a reminder to GM investors that the stock is highly sensitive to macroeconomic trends. If the trade war heats up again, don't be surprised to see the stock move in reverse once more.

Jeremy Bowman owns shares of General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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