Given that Tech layoffs have ramped higher each quarter since Q3 2021, I don’t see how Tech is an investor safe haven. Q1 2023 is the worst quarter yet in terms of the number of employees laid off and it could get far worse from here as this credit crisis will be more severe than 2008 given the amount of debt and lack of liquidity across the system. The Fed can’t afford to bail out all banks and support all deposits.
This credit crisis is unfolding just as 2008’s credit crisis did and will permeate all corners of the economy – including Technology – as was the case in 2008. The only difference is that this crisis will be worse than 2008 given the amount of debt and lack of liquidity in the system. The Fed can’t afford to bail out all banks. Thus, credit will tighten dramatically from here.
Tech valuations have far to fall. Within the world of Software I would stay away from HR Tech firms, Payments firms (probably FinTech in general) and companies that sell into the Commercial Real Estate (CRE) industry – particularly the Office segment. Valuations need to pull back before Software gets interesting.
Once Fund outflows hit the Financial Services industry hard, FinTech companies that largely get paid based on customer Assets Under Management (AUM), will feel pain.
For company specific advice, reach us at jmaietta@ceorater.com or jmaietta@tek2day.com
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