My investing muse - layoffs, recession and AI (19 Feb 2024)
My investing muse - layoffs, recession and AI
Layoffs continue into the last week.
Nike on Thursday said it will cut about 2% of its total workforce, or more than 1,600 jobs, as the sportswear giant looks to cut costs after flagging weaker profits this year. - CNBC
Israeli fintech company Riskified is laying off over 40 of its 750 employees, accounting for about 6% of its total workforce. - Calcalistech
Paramount Global announced Tuesday it is laying off about 800 employees, or roughly 3% of its workforce.Paramount Global, which owns CBS, said Monday that the network set record highs for Super Bowl viewership. - CNBC
Silicon Valley tech giant Cisco is getting ready to lay off thousands of employees in its latest reorganization effort to focus on high-growth areas, Reuters reports. Cisco announced plans to cut 5% of its workforce on Wednesday, a decision that will result in the elimination of about 4,250 jobs. - CNBC
Roche is cutting 345 jobs, Swiss website Muula reported, as the drugs company responds to lower profit posted for 2023 and a more cautious outlook for the year ahead. - Reuters
Layoffs can lead to a drop in disposable income. With huge job openings, it could lead to employment. However, it may not always lead to higher disposable income. Let's monitor.
Recession hits major economies
Japan’s economy dipped into a technical recession, after unexpectedly contracting again in the October-December period. - CNBC
UK slips into recession as reported by BBC.
Germany has entered a technical recession.
Eurozone narrowly escapes recession.
S&P500 and the US economy
With the S&P500 having an international business presence, this index & a few others no longer represent the country of this group of 500 international businesses. The S&P500 represents much more than the US economy.Roughly 40% of sales generated by S&P 500 companies come from outside the U.S. -Schwab
With 40% of sales generated by S&P 500 companies outside of the US, it may not be appropriate for us to refer to S&P 500 as the reference of the US market or economy.
With the S&P 500 hitting record highs, it does not imply that the US economy is doing well.
Conclusion
With some of America’s allies of Japan, the UK & Germany entering recession, the US should find them with fewer options to take over their federal debts.
It is possible that the S&P 500 hit another record following the earnings of Nvidia. CRE and regional banking are areas of concern with manufacturing continuing its slide. There was some relief with the previous PMI reporting expansion following months of contraction. The coming FOMC meeting minutes could bring some volatility to the market. With hopes of a March rate cut dwindling, a more hawkish FOMC minutes can trouble the market.
Let us continue to exercise caution. We can still see some record highs in the coming days. Some sectors are doing much better than others and thus, the average may render a "sense of security” for the overall market. Let us start to identify great companies with strong moats so that we can engage should the prices enter an attractive zone.
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