Why Amazon is a Key Indicator of a Recession: An Investment Expert

Evolution VC Partners founder Greg Smith says Amazon is a key indicator of a recession and that the company’s upcoming earnings report will be “very indicative” of what’s happening in the global economy.

Speaking of “Varney & Co.” On Wednesday, the investment expert stressed that “Amazon’s dialogue and what they are telling investors in about a month will be very indicative of what is happening to the economy.”

He said he believed the company’s earnings announcement would “give us an interesting look at consumers” and “what happens to consumer spending”.

“Their Amazon web services business, AWS, which is a $ 60+ billion giant, will tell us what’s going on with corporate spending. Do we see companies starting to cut costs and striving to cut costs? ”He continued.


Ticker Security Last Change Change%
AMZN AMAZON.COM INC. 108.67 +1.27 + 1.18%

He noted that “the technology giant’s mass media business, which has revenues of more than $ 30 billion,” will shed light on “what happens to the enterprise in the corporate client in terms of cost recovery.”

Smith stressed that the “big question lately” is whether a recession is inevitable, as inflation is at its 40-year high and some corporations have begun to decline as the Federal Reserve tries to curb hot inflation by raising interest rates.

The recession refers to a contraction in gross domestic product (GDP), the broadest measure of goods and services produced in the economy, for two consecutive quarters.

Smith gave the impression on Wednesday shortly after it was revealed that GDP activity fell at a worse-than-expected 1.6% annual rate in the first quarter, according to a final reading by the Commerce Department. The figure is slightly higher than the department’s first and second readings.

Many economists and analysts are wondering if the Fed can successfully design the elusive soft landing – the sweet spot between declining demand to cool inflation without sending the economy into decline. Rising interest rates lead to higher interest rates on consumer and business loans, which slows the economy, forcing employers to cut costs.

Amazon is a key indicator of a recession, given its footprint in the economy and markets, said Evolution VC Partners founder Greg Smith. (Reuters / Photos by Reuters)

Earlier this month, the Fed raised its key interest rate by 75 basis points for the first time in nearly three decades as politicians stepped up their fight to cool inflation.

Earlier this month, Federal Reserve Chairman Jay Powell tried to reassure Americans that higher interest rates would not cause a recession and that a tightening policy was needed to tame prices.

Smith said Wednesday that he is a venture capitalist and that as he analyzes his portfolio of more than 200 private companies, he realizes that “there is a very big difference in what they hear and see.”

“Many see amazing business, especially those who deal with consumers who have a consumer business, their business is very strong,” he told host Stuart Varney.

He then argued that due to “rhetoric from the media” and “the rattling of the sword by some of the big venture capital companies that winter is coming,” the companies began to defend themselves and prepare.


“So that leads to preventative cuts,” Smith said.

“They eliminate the projects they are working on. They lose real estate and get smaller footprints — so all of this puts pressure on the economy as they defend themselves and take a defensive stance. ”

Leave a Comment

Your email address will not be published.