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Big on Headlines, Small on Impact 🍌

Layoffs in the US and the Budget in India have been flooding headlines over the last week. While both can theoretically have a drastic impact on the markets, equities hardly seem to have a direction in 2023 so far.


Here’s adding some perspective:



Layoffs

Tech layoffs have dominated headlines globally this week. Alphabet, Amazon, Meta and Microsoft all announced job cuts that will affect nearly 50,000 employees combined.


Ideally, one would feel a large number of tech layoffs are a sign of distress in the economy, and that would mean another sign of relaxation on monetary policy tightening, right? Wrong.

Here’s why the seemingly massive tech layoffs don't matter much:


Tech giants are laying people off, but they had also hired massively since the beginning of COVID. Over differing periods between 2020 and 2022, Alphabet hired more than 35,000 people. Microsoft had hired 40,000 and Meta was at more than 25,000. The recent firing is hardly a big deal compared to the ballistic growth that tech companies had seen in a sit-at-home digital boom.


The US Fed takes employment data seriously on decisions around rates. However, the overall tech sector contributes to less than 10% of the total workforce. The tech job cuts hence although huge is just a fraction of the whole deal. ‘Surprisingly’, this week’s data also suggested jobless claims dropped to their lowest level since September. The labour market is still red hot.


No wonder, despite lower inflation, a troubled housing market, and a sharp fall in retail sales, Fed officials still made hawkish comments saying they are ‘determine to stay the course’ until inflation is back at the target 2%.


With this, global markets continue to be dominated by opposing reactions to hope and data.


Budget 2023

While the US focuses on layoffs, the Union Budget has been making headlines in India. The probability of the Budget has been spread across:


Continuing to fuel growth by being heavy on CAPEX, infrastructure and reforms - a tried and tested model that’s been working for the last few years, and


Being populist and giving - something that would please the masses in the last full-year budget before General Elections in 2024


The spread hence makes it a pretty critical budget, and more decisive action, which will drive a firm direction for the markets can only be expected after the budget.


By the way, we, at Rupeeting have been adding to the newsprint as well! Check out a couple of pieces we wrote for leading business papers.


 


Budget 2023: Need of the hour is a bold bet on CAPEX


Business Today, January 11, 2023

https://www.businesstoday.in/union-budget/opinion/story/budget-2023-need-of-the-hour-is-a-bold-bet-on-capex-359411-2023-01-09





Divestments? Why there’s no point being myopic this Budget


Economic Times, January 20, 2023

https://economictimes.indiatimes.com/markets/stocks/news/divestments-why-theres-no-point-being-myopic-this-budget/articleshow/97168888.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

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