The Nasdaq 100 finished 2022 down 32%, and bullish tech traders are hoping that 2023 brings a turnaround, but like all good things, it could take time. That said, there are always opportunities to play the upside and downside with leveraged exchange traded funds (ETFs) in Direxion Investments’ arsenal of tactical funds.
Right now, big tech is bleeding talent in the form of mass layoffs. This is carrying over from last year, which means there’s no telling when it will stop in the new year.
From Google to Amazon, the biggest tech stars are purging a workforce accumulated during the height of the pandemic. Of course, that was when a heavy reliance on tech was abundant as consumers headed online in order to purchase goods and services — that’s certainly not the case anymore.
“The massive job cuts by Amazon.com Inc, one of the biggest private employers in the United States, show the wave of layoff sweeping through the tech sector could stretch into 2023 as companies rush to cut costs, analysts said on Thursday (Jan 5),” Reuters reported.
“As a demand boom during the pandemic rapidly turns into bust, tech companies shed more than 150,000 workers in 2022, according to tracking site Layoffs.fyi, a number that is growing as growth in the world’s biggest economies start to slow,” the report said further.
A sustained bearish outlook on big tech should feed into strength for the Direxion Daily Technology Bear 3X ETF (TECS). TECS seeks daily investment results, before fees and expenses, of 300% of the inverse (or opposite) of the daily performance of the Technology Select Sector Index.
Inflation eating corporate profits certainly had a hand in big tech’s weakness in 2022. However, cost-cutting in the form of layoffs could be a way for big tech companies to protect themselves if a recession should strike again as it did in 2008.
“They’re trying to protect themselves so that they’re not caught in the 2008-2009 cycle that we had,” said Greg Selker, managing director at executive search firm Stanton Chase.
Optimism for a Tech Rebound
Not everyone is predicting doom and gloom for the tech sector. The mass layoffs occurring could offer a fresh start for big tech companies, giving investors options for growth as companies potentially become leaner and meaner in 2023.
If that’s the case, then there’s an opportunity to go bullish with the Direxion Daily Technology Bull 3X ETF (TECL). The fund offers the same triple leverage as TECS, but with an obvious bullish slant.
If tech companies can show early signs of a turnaround, TECL could be a prime play, but it could take some time. If earnings reports and 2023 outlooks are rosy, then TECL could provide traders with a short-term pop.
“In this carnage we see growth opportunities as we believe overall the tech sector will be up roughly 20% in 2023 from current levels with Big Tech, software, and semis leading the charge despite the macro/Fed wild cards,” said Daniel Ives, the managing director of equity research at Wedbush Securities.
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