Since the pandemic began, financial analysts and economists alike have been discussing the poorly performing markets and an impending recession. Although people are still debating the semantics of it, the economic signs don’t look good. We are feeling the impacts of decreased production and trade. The war in Ukraine and other global factors have also contributed to disruptions in the supply chain and the current inflation rates. And now, companies are cutting job production and enacting layoffs. In uncertain times like these, many people look to the largest and most successful corporations to gauge the markets. So if you are searching for them, here are signs from America’s biggest companies about the future economy.
Signs about the Future Economy from 7 of America’s Biggest Companies
First of all, let’s be clear that it is impossible to predict the future or know how the markets will respond. However, some trends and indications offer insights into what lies ahead. In times of turmoil, many investors look to the most successful companies to help decipher the financial status of the economy. Although they aren’t all headline news, here are a few signs about the future economy from 7 of America’s biggest companies.
AAPL has long been one of the hottest stocks and a safe investment option. And with the latest iPhone release, Apple is stronger than ever. In fact, it reported record-breaking profits for Q2, netting more than $83 billion in revenue. While many fear a recession, Apple’s CFO assures that they will effectively manage their business, even in a challenging operating environment.
Beyond a doubt, Apple is a company that has weathered many economic booms and downturns. But the fact that the CFO even refers to a challenging environment is worrisome. And although they aren’t showing any signs of slowing down, Apple is still planning to cut costs and slow hiring for 2023.
Based on their reported earnings, the multinational technology conglomerate and parent company of Google hasn’t felt any of the financial impacts of current market conditions. When you look at a side-by-side comparison, the revenue for Q2 is up 13% from the same time last year. And, these gains are in addition to the 62% growth it experienced last year as well.
Those in the tech industry can breathe a little knowing that Alphabet and the Google CEO have not announced any plans for staff layoffs. However, there is still cause for concern since they have established an “efficiency program” to ensure employees increase their productivity. Some employees fear this is paving the way for future layoffs and that their jobs could be eliminated if these goals are not met.
Mark Zuckerberg has taken a very public and cynical stance on the global economy. He has even gone as far as to say this could be “one of the worst downturns that we’ve seen in recent history” during a town hall meeting in July.
So, it should come as no surprise that Meta is preparing for the worst. They are currently looking for ways to trim the budget (reducing costs and staff) to hedge against an uncertain future. Instead of hiring 10,000 additional engineers as planned, they’ve cut these roles by 30%. Furthermore, they are raising productivity goals and laying off anyone who fails to meet them. Although it may be an effective way to control the budget, this strategy could cause other corporations to enact the same measures and start a domino effect across industries.
Amid all the financial chaos of the pandemic, J.P. Morgan still reported over $48 billion in revenue in 2021. However, 2022 is turning out to be a different story. When it failed to meet its profit goals last quarter, it temporarily suspended its buyback shares. Although it isn’t a telltale sign, decisions like this often precede a recession.
But, it is crucial to note that people are not defaulting on their debts. Since people are still able to work and earn income, it’s a good indication that the job market will hold steady. As long as people can continue repaying their debts, it offers some hope that we can still avoid a full-blown recession.
With fewer people going to brick-and-mortar locations and shopping online, Amazon has seen exponential growth during the pandemic. It became the default supplier for nearly everything from groceries and clothing to electronics and household appliances. By the middle of 2021, its profits rose more than 200%. Furthermore, inflation didn’t balloon as much as expected, leaving Amazon with a 7% sales increase by the end of Q2 in 2022.
However, demands are slowing and many large retailers, including Amazon, have experienced setbacks this fiscal year. Amazon got ahead of its losses, reducing its workforce by 6% and cutting 100,000 jobs globally. This has been the largest quarterly cut in the company’s history. While its corporate practices and policies have been highly criticized, these cuts indicate that it is taking a more conservative stance on future performance.
Issues with the supply chain have left many retailers like Walmart in a predicament. During the early days of the pandemic, they had issues keeping items on the shelves. But now that inflation has risen and consumers have stopped purchasing non-essential items, they are overstocked. Due to the backlog, Walmart lowered its expected profits which in turn caused its stock price to drop back in July. It has also laid off 200 corporate positions.
But, it’s important to note that the layoffs didn’t affect employees in non-corporate positions. And, recent statements show that sales started to pick up as children went back to school and will build momentum as we enter the holiday sales season. It seems that even though Walmart’s revenue growth slowed during the last few quarters, Walmart will remain relatively unscathed through these market fluctuations.
Despite the consumer slowdown, Best Buy’s sales are higher than they were before the pandemic started. You would think these are good signs about the future economy. However, they still reported significant losses for the second quarter. And, its stock has fallen by 30% this year.
The company is blaming it on inflation and less consumer confidence. To curb the impact, it implemented nationwide layoffs in August to recover some of the financial loss. But, Best Buy is looking for ways to re-energize growth and create more jobs as the holidays approach.
Outlook for the Future
For many people, the outlook is bleak since there are many negative signs about the future economy. Companies missing revenue goals, reducing costs, and slowing/stopping hiring all indicate that we are heading toward a recession. However, there are more factors at play that are affecting the markets.
Moreover, there are also several positive indications that the markets could rebound. For example, many companies are still showing growth. Although inflation has been high, it didn’t balloon as much as expected. And despite all the negative financial news, the U.S. job market has remained relatively stable. Even in uncertain times, we are still finding ways to make money that will help businesses and individuals survive, even if we enter a recession.