My investing muse (23 Jan 2023) - BigTech layoffs, underperforming stocks & debt ceiling
My investing Muse
BigTech has started the year with a series of layoffs. Unfortunately, this could be closer to the start instead of the end. The coming earnings season will provide some insight into the outlook of the market. Beyond the revenue and EPS, the market outlook will also affect the price following the earnings. Let us monitor the outlook.
With the layoffs, it would lead to reduced spending. However, we can also see more starting their own businesses - choosing to be entrepreneurs than salaried staff. Hopefully, we can see more innovations and advances in the coming months.
If we have any underperforming stocks, it would be good to take profits or stop losses for these positions. Let us divert the funds to other assets with much better fundamentals. At the same time, we need to look out for businesses with weakening balance sheets. There were some businesses which surged during Covid without profits and more debts. In order for these companies to generate cash flow, they need to take on loans (at higher interest rates) or sell more shares in the market. Both are not good for the business and outlook. Should they accumulate more debt, these are red flags which will push these stocks into the “stop loss” pile. Personally, I may follow the technical indicators and cut my losses (or take profits) for such stocks.
Warnings have been sounded about the debt ceiling. While most have resigned to an eventual increase in the debt ceiling, the negotiations to get to this agreement can be tedious and painful. The US is expected to avoid a default on their payments but there is nothing guaranteed. This could cause much volatility in the market.
The US has an annual GDP of about USD$25 trillion. Thus, the payment of $1.2 trillion in interest (by 2024) can set the economy back significantly from various meaningful upgrades & revamp of policies. The practice of borrowing money from the future needs to stop. The government needs to spend within their means.
In lieu of these, I prefer to be monitoring the market this season. Not buying can also be a good trade. The coming GDP figure will be interesting and the earnings reveal much more about how the market is performing. Let us research before investing.
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