Layoffs are ticking up now (Google, Cisco, Roku, Evolve, Drift to name a few) as companies work through 2024 operating budgets.
As interest rates and the cost of capital remain elevated in Q4, I suspect that companies – especially those with elevated Debt/EBITDA ratios – will announce further layoffs in October and November. However, I expect that the next big round of corporate layoffs will be announced in January 2024. The reason for this is that I get the sense that many CEOs, Boards and investors expect that the Fed will rapidly drop its Fed Funds rate at the turn of the new calendar year and, that the Fed Funds rate will be back at zero percent (ZIRP), by March/April 2024. That is possible. However, I do not believe it is likely that the Fed will take its Fed Funds rate to zero percent at any time during 2024 after spending almost two years pushing it to almost 6%. We may see a 6% Fed Funds rate before this cycle is over.