The machinations of a recession could already be manifesting themselves in layoffs during the month of May. The job markets for retail and tech were especially vulnerable last month.
Per a PYMNTS report, there was a total of “80,089 job cuts announced by United States-based employers in May, with the technology sector being hardest hit.” Job cuts were 20% higher compared to the previous month and 287% higher versus a year earlier, per data from employment firm Challenger, Gray and Christmas.
Could these be early indications that the recession capital markets are fearing could already be underway?
“Consumer confidence is down to a six-month low, and job openings are flattening,” said Andrew Challenger, labor expert and senior vice president at Challenger, Gray and Christmas. “Companies appear to be putting the brakes on hiring in anticipation of a slowdown.”
Layoffs in tech aren’t that big of a surprise, especially after last year’s bearish trend. A lot of big tech companies were shedding the work forces accumulated during the early pandemic hiring amid tech’s bull run prior to 2022.
That said, it could be a continuation of tech looking to be leaner and meaner to get through 2023. Thus far, it appears to be working when considering the performance of the Nasdaq-100, which is up over 30% for the year and has all the momentum behind it, despite recession fears swirling in the capital markets.
ETFs to Watch
That said, traders can watch a few leveraged exchange traded funds (ETFs) from Direxion, given the recent layoff data. With retail, traders may want to keep an eye on the Direxion Daily Retail Bull 3X ETF (RETL), which seeks daily investment results of 300% of the daily performance of the S&P Retail Select Industry Index. If the economy manages to stave off a recession and consumers’ confidence returns in a big way, the retail sector could benefit.
The ups and downs of big tech always make for potential trade set-ups. For bullishness, which is prevailing at the moment, there’s the Direxion Daily Technology Bull 3X ETF (TECL), which seeks daily investment results, before fees and expenses, of 300% of the daily performance of the Technology Select Sector Index that primarily includes domestic companies from the technology sector.
When tech goes through pullbacks, traders can always take the other side with inverse ETFs. In particular, for tech, consider the Direxion Daily Technology Bear 3X ETF (TECS), which essentially puts TECL in reverse.
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