Looks like when it comes to the tech sector there is no dearth of bad news. We only hear layoffs. Have you wondered why are these layoff happening and when these giant company say that they say inflation is the issue what are they trying to tell us. I will answer below.
So when the COVID saga ended and when the world was slowly limping back to normalcy we had another bad news war in Ukraine and the last hope of economy recovery went down the drain. Reason was simple food shortage, expensive gas and all the countries across the globe had energy crisis. In fact the first to go was Sri Lanka and the next in line is Pakistan. In fact there are lot of countries who’s food security is at risk. So during pandemic US government printed lot of currency not only US but other countries also followed as the world was sitting home with no jobs, and how does the government feed its people , give money . So when Pandemic ended people had money to spend but because of war and other reasons supply was low. So when demand is high and supply is low cost increases.
So how do you fix it reduce demand and how do you do that increase the lending rates of Mortgages , car loan which will leave less money in consumers hands. On the flip side of this though we could get the inflation down the demand went down and stabilised the inflation rate. However since the lending rates were high companies borrowing went low thus IT and other spends slowed down. No companies who had planned to invest in IT were paying to the bank as part of interest.
So what is the analyst saying ? Well FOMC (Federal Open Market Committee) meeting has started today, which is a 2 day meet and they have press release on 1st Feb 2023. It’s expected that the Fed will hike interest rates by 25 basis point. So we expect the Mr Powell to tone down the increase in interest rates. So the message is clear though US market is volatile today and has spilled to the world , I feel the S&P will soon do the upward stride.
Watch this space for more updates. God luck