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Tag: BlackRock Inc

  • JPMorgan bond chief Bob Michele sees worrying echoes of 2008 in market calm

    JPMorgan bond chief Bob Michele sees worrying echoes of 2008 in market calm

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    Bob Michele, Managing Director, is the Chief Investment Officer and Head of the Global Fixed Income, Currency & Commodities (GFICC) group at JPMorgan.

    CNBC

    To at least one market veteran, the stock market’s resurgence after a string of bank failures and rapid interest rate hikes means only one thing: Watch out.

    The current period reminds Bob Michele, chief investment officer for JPMorgan Chase‘s massive asset management arm, of a deceptive lull during the 2008 financial crisis, he said in an interview at the bank’s New York headquarters.

    “This does remind me an awful lot of that March-to-June period in 2008,” said Michele, rattling off the parallels.

    Then, as now, investors were concerned about the stability of U.S. banks. In both cases, Michele’s employer calmed frayed nerves by swooping in to acquire a troubled competitor. Last month, JPMorgan bought failed regional player First Republic; in March 2008, JPMorgan took over the investment bank Bear Stearns.

    “The markets viewed it as, there was a crisis, there was a policy response and the crisis is solved,” he said. “Then you had a steady three-month rally in equity markets.”

    The end to a nearly 15-year period of cheap money and low interest rates around the world has vexed investors and market observers alike. Top Wall Street executives, including Michele’s boss Jamie Dimon, have raised alarms about the economy for more than a year. Higher rates, the reversal of the Federal Reserve’s bond-buying programs and overseas strife made for a potentially dangerous combination, Dimon and others have said.

    But the American economy has remained surprisingly resilient, as May payroll figures surged more than expected and rising stocks caused some to call the start of a fresh bull market. The crosscurrents have divided the investing world into roughly two camps: Those who see a soft landing for the world’s biggest economy and those who envision something far worse.

    Calm before the storm

    For Michele, who began his career four decades ago, the signs are clear: The next few months are merely a calm before the storm. Michele oversees more than $700 billion in assets for JPMorgan and is also global head of fixed income for the bank’s asset management arm.

    In previous rate-hiking cycles going back to 1980, recessions start an average of 13 months after the Fed’s final rate increase, he said. The central bank’s most recent move happened in May.

    In that ambiguous period just after the Fed has finished raising rates, “you’re not in a recession; it looks like a soft landing” because the economy is still growing, Michele said.

    “But it would be a miracle if this ended without recession,” he added.

    The economy will probably tip into recession by the end of the year, Michele said. While the downturn’s start could get pushed back, thanks to the lingering effects of Covid stimulus funds, he said the destination is clear.

    “I’m highly confident that we’re going to be in recession a year from now,” he said.

    Rate shock

    Other market watchers do not share Michele’s view.

    BlackRock bond chief Rick Rieder said last month that the economy is in “much better shape” than the consensus view and could avoid a deep recession. Goldman Sachs economist Jan Hatzius recently dialed down the probability of a recession within a year to just 25%. Even among those who see recession ahead, few think it will be as severe as the 2008 downturn.

    To start his argument that a recession is coming, Michele points out that the Fed’s moves since March 2022 are its most aggressive series of rate increases in four decades. The cycle coincides with the central bank’s steps to rein in market liquidity through a process known as quantitative tightening. By allowing its bonds to mature without reinvesting the proceeds, the Fed hopes to shrink its balance sheet by up to $95 billion a month.

    “We’re seeing things that you only see in recession or where you wind up in recession,” he said, starting with the roughly 500-basis point “rate shock” in the past year.

    Other signs pointing to an economic slowdown include tightening credit, according to loan officer surveys; rising unemployment filings, shortening vendor delivery times, the inverted yield curve and falling commodities values, Michele said.

    Pain trade

    The pain is likely to be greatest, he said, in three areas of the economy: regional banks, commercial real estate and junk-rated corporate borrowers. Michele said he believes a reckoning is likely for each.  

    Regional banks still face pressure because of investment losses tied to higher interest rates and are reliant on government programs to help meet deposit outflows, he noted.

    “I don’t think it’s been fully solved yet; I think it’s been stabilized by government support,” he said.

    Downtown office space in many cities is “almost a wasteland” of unoccupied buildings, he said. Property owners faced with refinancing debt at far higher interest rates may simply walk away from their loans, as some have already done. Those defaults will hit regional bank portfolios and real estate investment trusts, he said.

    A woman wearing her facemask walks past advertising for office and retail space available in downtown Los Angeles, California on May 4, 2020.

    Frederic J. Brown | AFP | Getty Images

    “There are a lot of things that resonate with 2008,” including overvalued real estate, he said. “Yet until it happened, it was largely dismissed.”

    Last, he said below investment grade-rated companies that have enjoyed relatively cheap borrowing costs now face a far different funding environment; those that need to refinance floating-rate loans may hit a wall.

    “There are a lot of companies sitting on very low-cost funding; when they go to refinance, it will double, triple or they won’t be able to and they’ll have to go through some sort of restructuring or default,” he said.

    Ribbing Rieder

    Given his worldview, Michele said he is conservative with his investments, which include investment grade corporate credit and securitized mortgages.

    “Everything we own in our portfolios, we’re stressing for a couple quarters of -3% to -5% real GDP,” he said.

    That contrasts JPMorgan with other market participants, including his counterpart Rieder of BlackRock, the world’s biggest asset manager.

    “Some of the difference with some of our competitors is they feel more comfortable with credit, so they are willing to add lower-rate credits believing that they’ll be fine in a soft landing,” he said.

    Despite gently ribbing his competitor, Michele said he and Rieder were “very friendly” and have known each other for three decades, dating to when Michele was at BlackRock and Rieder was at Lehman Brothers. Rieder recently teased Michele about a JPMorgan dictate that executives had to work from offices five days a week, Michele said.

    Now, the economy’s path could write the latest chapter in their low-key rivalry, leaving one of the bond titans to look like the more astute investor.

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  • BlackRock bond chief Rieder says U.S. economy in ‘much better shape’ than doomsayers say

    BlackRock bond chief Rieder says U.S. economy in ‘much better shape’ than doomsayers say

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    Rick Rieder, BlackRock’s Chief Investment Officer of Global Fixed Income, speaks during a Reuters investment summit in New York, November 7, 2019.

    Lucas Jackson | Reuters

    NEW YORK – When the bond chief of the world’s biggest asset manager looks at the U.S. right now, he sees a lot to like.

    A combination of resilient government, corporate and consumer spending, improving homebuilder data, $1.5 trillion in excess savings and low unemployment tell BlackRock’s Rick Rieder that the American economy is faring better than many expected.

    “I think the U.S. economy’s in much better shape than people give credit” for, Rieder said Tuesday at an event at BlackRock’s New York headquarters.

    “There’s this thesis that you will have a dramatic slowdown,” he said. “When you break down the numbers, it’s just not apparent.” 

    Talk of an impending recession has been building as the impact of the Federal Reserve’s interest rate increases ripple through the economy. The collapse of three midsized banks this year have stoked concerns that lenders will rein in access to credit, further slowing down the economy. Still, employment figures have confounded expectations, most recently for April, when nonfarm payrolls jumped by 253,000.

    “When people talk about, ‘We’re going to a recession or a deep recession,’ it’s pretty unusual [or] almost impossible when you have an unemployment rate of 3.4%,” Rieder said.

    Lots of cash sidelined

    Rieder, a three-decade veteran of the markets who oversees $2.4 trillion in assets, said he expects the Fed to pause rate increases at its next meeting. While the central bank could raise rates once more after that, he said that its rate-hiking campaign is largely done.

    That expectation, combined with slowing inflation, gives investors a good backdrop, even if he does expect the economy to slow later this year, Rieder said.

    The biggest threat to Rieder’s thesis is a potential U.S. default on its sovereign debt, which could usher in panic and be “potentially catastrophic” for the economy, according to experts including JPMorgan Chase CEO Jamie Dimon. Treasury Secretary Janet Yellen has said that the U.S. could lose the ability to pay its bills as soon as June 1.

    Rieder puts a “very high probability” of the Biden administration striking a deal with Republican lawmakers, he said.

    “I’ve never seen so much money sitting in cash, and a lot of it” waiting for a debt ceiling resolution before being deployed, he said.

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  • Larry Fink sells 7% of his BlackRock stake

    Larry Fink sells 7% of his BlackRock stake

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    BlackRock Inc.
    BLK,
    +0.16%
    Chief Executive Larry Fink sold 35,799 BlackRock shares on Tuesday, according to a regulatory filing, garnering about $25 million in proceeds. That’s equal to about 7% of Fink’s stake in the company. The deal was executed in three trades at prices ranging from $694.00 to $696.35, according to the filing. The stock is down 1.7% in the year to date, while the S&P 500
    SPX,
    -0.60%
    has gained 8%.

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  • BlackRock’s Larry Fink on earnings beat, banking crisis fallout and bond inflows

    BlackRock’s Larry Fink on earnings beat, banking crisis fallout and bond inflows

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    Larry Fink, BlackRock chairman and CEO, joins ‘Squawk on the Street’ to discuss money leaving the banking system in to the capital markets, changing payments with digitizing currency, and interest rates remaining higher for longer.

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  • BlackRock’s Rieder says more volatility could ‘play through the financial system’

    BlackRock’s Rieder says more volatility could ‘play through the financial system’

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  • Crunch time for Credit Suisse talks as UBS seeks Swiss assurances

    Crunch time for Credit Suisse talks as UBS seeks Swiss assurances

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    Red pedestrian crossing signs outside a Credit Suisse Group AG bank branch in Basel, Switzerland, on Tuesday, Oct. 25, 2022. 

    Stefan Wermuth | Bloomberg | Getty Images

    Talks over rescuing Credit Suisse rolled into Sunday as UBS sought $6 billion from the Swiss government to cover costs if it were to buy its struggling rival, a person with knowledge of the talks said.

    Authorities are scrambling to resolve a crisis of confidence in the 167-year-old Credit Suisse, the mostly globally significant bank caught in the turmoil spurred by the collapse of U.S. lenders Silicon Valley Bank and Signature Bank over the past week.

    While regulators want a resolution before markets reopen on Monday, one source cautioned the talks are encountering significant obstacles, and 10,000 jobs may have to be cut if the two banks combine.

    The guarantees UBS is seeking would cover the cost of winding down parts of Credit Suisse and potential litigation charges, two people told Reuters.

    Credit Suisse, UBS and the Swiss government declined to comment.

    The frenzied weekend negotiations follow a brutal week for banking stocks and efforts in Europe and the U.S. to shore up the sector. U.S. President Joe Biden’s administration moved to backstop consumer deposits while the Swiss central bank lent billions to Credit Suisse to stabilise its shaky balance sheet.

    UBS was under pressure from the Swiss authorities to take over its local rival to get the crisis under control, two people with knowledge of the matter said. The plan could see Credit Suisse’s Swiss business spun off.

    This fund manager shorted Credit Suisse — and he’s sticking with his bet

    Switzerland is preparing to use emergency measures to fast-track the deal, the Financial Times reported, citing two people familiar with the situation.

    U.S. authorities are involved, working with their Swiss counterparts to help broker a deal, Bloomberg News reported, also citing those familiar with the matter.

    Berkshire Hathaway‘s Warren Buffett has held discussions with senior Biden administration officials about the banking crisis, a source told Reuters.

    'Timely and right' for Swiss National Bank to throw Credit Suisse a liquidity line: Advisory firm

    The White House and U.S. Treasury declined to comment.

    British finance minister Jeremy Hunt and Bank of England Governor Andrew Bailey are also in regular contact this weekend over the fate of Credit Suisse, a source familiar with the matter said. Spokespeople for the British Treasury and the Bank of England’s Prudential Regulation Authority, which oversees lenders, declined to comment.

    Forceful response

    Credit Suisse shares lost a quarter of their value in the last week. The bank was forced to tap $54 billion in central bank funding as it tries to recover from a string of scandals that have undermined the confidence of investors and clients.

    It ranks among the world’s largest wealth managers and is considered one of 30 global systemically important banks – the failure of any would ripple throughout the entire financial system.

    There were multiple reports of interest for Credit Suisse from other rivals. Bloomberg reported that Deutsche Bank was considering buying some of its assets, while U.S. financial giant BlackRock denied a report that it was participating in a rival bid for the bank.

    Interest rate risk

    The failure of California-based Silicon Valley Bank brought into focus how a relentless campaign of interest rate hikes by the U.S. Federal Reserve and other central banks – including the European Central Bank on Thursday – was pressuring the banking sector.

    SVB and Signature’s collapses are largest bank failures in U.S. history behind the demise of Washington Mutual during the global financial crisis in 2008.

    First Citizens BancShares is evaluating an offer for SVB and at least one other suitor is seriously considering an offer, Bloomberg News reported on Saturday.

    People walk by the New York headquarters of Credit Suisse on March 15, 2023 in New York City. 

    Fail or sale? What could be next for stricken Credit Suisse

    Banking stocks globally have been battered since SVB collapsed, with the S&P Banks index falling 22%, its largest two-week loss since the pandemic shook markets in March 2020.

    Big U.S. banks threw a $30 billion lifeline to smaller lender First Republic. U.S. banks have sought a record $153 billion in emergency liquidity from the Federal Reserve in recent days.

    The Mid-Size Bank Coalition of America asked regulators to extend federal insurance to all deposits for the next two years, Bloomberg News reported on Saturday, citing a letter from the coalition.

    In Washington, focus has turned to greater oversight to ensure that banks and their executives are held accountable.

    UBS in talks to acquire all or part of Credit Suisse

    Biden called on Congress to give regulators greater power over the sector, including imposing higher fines, clawing back funds and barring officials from failed banks.

    The swift and dramatic events may mean big banks get bigger, smaller banks may strain to keep up and more regional lenders may shut.

    “People are actually moving their money around, all these banks are going to look fundamentally different in three months, six months,” said Keith Noreika, vice president of Patomak Global Partners and a Republican former U.S. comptroller of the currency.

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  • UBS reportedly seeks $6 billion in government guarantees for Credit Suisse takeover

    UBS reportedly seeks $6 billion in government guarantees for Credit Suisse takeover

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    UBS reports its latest earnings

    FABRICE COFFRINI | AFP | Getty Images

    UBS is asking the Swiss government to cover about $6 billion in costs if it were to buy Credit Suisse, a person with knowledge of the talks said, as the two sides raced to hammer together a deal to restore confidence in the ailing Swiss bank.

    The 167-year-old Credit Suisse is the biggest name ensnared in the turmoil unleashed by the collapse of U.S. lenders Silicon Valley Bank and Signature Bank over the past week, spurring a rout in banking stocks and prompting authorities to rush out extraordinary measures to keep banks afloat.

    The $6 billion in government guarantees UBS is seeking would cover the cost of winding down parts of Credit Suisse and potential litigation charges, two people told Reuters.

    One of the sources cautioned that the talks to resolve the crisis of confidence in Credit Suisse are encountering significant obstacles, and 10,000 jobs may have to be cut if the two banks combine.

    Swiss regulators are racing to present a solution for Credit Suisse before markets reopen on Monday, but the complexities of combining two behemoths raises the prospect that talks will last well into Sunday, said the person, who asked to remain anonymous because of the sensitivity of the situation.

    Credit Suisse, UBS and the Swiss government declined to comment.

    The frenzied weekend negotiations come after a brutal week for banking stocks and efforts in Europe and the U.S. to shore up the sector. U.S. President Joe Biden’s administration moved to backstop consumer deposits while the Swiss central bank lent billions to Credit Suisse to stabilize its shaky balance sheet.

    UBS was under pressure from the Swiss authorities to carry out a takeover of its local rival to get the crisis under control, two people with knowledge of the matter said. The plan could see Credit Suisse’s Swiss business spun off.

    Switzerland is preparing to use emergency measures to fast-track the deal, the Financial Times reported, citing two people familiar with the situation.

    U.S. authorities are involved, working with their Swiss counterparts to help broker a deal, Bloomberg News reported, also citing those familiar with the matter.

    British finance minister Jeremy Hunt and Bank of England Governor Andrew Bailey are also in regular contact this weekend over the fate of Credit Suisse, a source familiar with the matter said. Spokespeople for the British Treasury and the Bank of England’s Prudential Regulation Authority, which oversees lenders, declined to comment.

    Forceful response

    Credit Suisse shares lost a quarter of their value in the last week. It was forced to tap $54 billion in central bank funding as it tries to recover from a string of scandals that have undermined the confidence of investors and clients.

    The company ranks among the world’s largest wealth managers and is considered one of 30 global systemically important banks whose failure would ripple throughout the entire financial system.

    The banking sector’s fundamentals are stronger and the global systemic linkages are weaker than during the 2008 global financial crisis, Goldman analyst Lotfi Karoui wrote in a late Friday note to clients. That limits the risk of a “potential vicious circle of counterparty credit losses,” Karoui said.

    “However, a more forceful policy response is likely needed to bring some stability,” Karoui said. The bank said the lack of clarity on Credit Suisse’s future will pressure the broader European banking sector.

    A senior official at China’s central bank said on Saturday that high interest rates in the major developed economies could continue to cause problems for the financial system.

    There were multiple reports of interest for Credit Suisse from other rivals. Bloomberg reported that Deutsche Bank was looking at the possibility of buying some of its assets, while U.S. financial giant BlackRock denied a report that it was participating in a rival bid for the bank.

    Interest rate risk

    The failure of California-based Silicon Valley Bank brought into focus how a relentless campaign of interest rate hikes by the U.S. Federal Reserve and other central banks — including the European Central Bank this week — was pressuring the banking sector. SVB and Signature’s collapses are the second- and third-largest bank failures in U.S. history behind the demise of Washington Mutual during the global financial crisis in 2008.

    Banking stocks globally have been battered since SVB collapsed, with the S&P Banks index falling 22%, its largest two weeks of losses since the pandemic shook markets in March 2020.

    Big U.S. banks threw a $30 billion lifeline to smaller lender First Republic, and U.S. banks altogether have sought a record $153 billion in emergency liquidity from the Federal Reserve in recent days.

    In Washington, focus has turned to greater oversight to ensure that banks and their executives are held accountable.

    Biden called on Congress to give regulators greater power over the sector, including imposing higher fines, clawing back funds and barring officials from failed banks.

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  • BlackRock denies report that it’s preparing a takeover bid for Credit Suisse

    BlackRock denies report that it’s preparing a takeover bid for Credit Suisse

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    BlackRock headquarters in New York, US, on Friday, Jan. 13, 2023. via Getty Images

    Michael Nagle | Bloomberg | Getty Images

    BlackRock has denied a report that it is preparing a takeover bid for embattled Swiss lender Credit Suisse.

    “BlackRock is not participating in any plans to acquire all or any part of Credit Suisse, and has no interest in doing so,” a company spokesperson told CNBC Saturday morning.

    It comes after the Financial Times reported that the U.S. asset manager was working on a bid to acquire the bank, citing people familiar with the situation.

    UBS has also been suggested as a potential buyer, with the FT reporting Friday that it is in talks to take over all or part of Credit Suisse. UBS hasn’t commented on the report.

    Credit Suisse’s future looks to be hanging in the balance after a multibillion-dollar lifeline offered by the Swiss central bank last week failed to calm investors.

    Credit Suisse’s shares registered their worst weekly decline since the onset of the coronavirus pandemic last week, and are down almost 35% over the month to date.

    The latest slide in stock price came after the Saudi National Bank revealed it would not provide the bank with any more cash, and follows a delay of its annual results over financial reporting concerns.

    The failure of Silicon Valley Bank — the largest U.S. banking failure since Lehman Brothers — and the shuttering of New York-based Signature Bank compounded nervousness around the global banking sector.

    Credit Suisse was already in the midst of a massive strategic overhaul aimed at restoring stability and profitability. It has faced various scandals and controversies over recent years, including the fallout from its involvement with the collapsed supply chain finance firm, Greensill Capital, which led to $1.7 billion in losses.

    The default at hedge fund Archegos Capital not long after led to another $5.5 billion loss for the Swiss investment bank.

    These — and other controversies — hit investor and customer confidence hard, with the bank losing billions of dollars in deposits as a result.

    — CNBC’s Ganesh Rao and Elliot Smith contributed to this report.

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  • Crypto-focused bank Silvergate is shutting operations and liquidating after market meltdown

    Crypto-focused bank Silvergate is shutting operations and liquidating after market meltdown

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    Omar Marques | Lightrocket | Getty Images

    Silvergate Capital, a central lender to the crypto industry, said on Wednesday that it’s winding down operations and liquidating its bank. The stock plunged more than 36% in after-hours trading.

    Silvergate has served as one of the two main banks for crypto companies, along with New York-based Signature Bank. Silvergate has just over $11 billion in assets, compared with over $114 billion at Signature. Bankrupt crypto exchange FTX was a major Silvergate customer.

    “In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward,” the company said in a statement.

    All deposits will be fully repaid, according to a liquidation plan shared on Wednesday. The company didn’t say how it plans to resolve claims against its business.

    Centerview Partners will act as Silvergate’s financial advisor and Cravath, Swaine & Moore will provide legal services.

    The liquidation comes less than a week after Silvergate discontinued its payments platform known as the Silvergate Exchange Network, or SEN, which was considered to be one of its core offerings. As part of the liquidation announcement, Silvergate clarified that all other deposit-related services remain operational as the company winds down. Customers will be notified should there be any further changes.

    Silvergate said last week it would delay the filing of its annual 10-K for 2022 while it sorted out the “viability” of its business. The company disclosed that the delayed filing was partly due to an imminent regulatory crackdown, including a probe already underway by the Department of Justice.

    Silvergate also attributed the delay to Congressional inquiries, as well as investigations from its banking regulators, which include the Federal Reserve and the California Department of Financial Protection and Innovation.

    Crypto companies like Coinbase and Galaxy Digital raced to cut ties with Silvergate last week after the bank warned that it was unsure whether it could stay in business.

    Silvergate has been struggling for months. In addition to laying off 40% of its workforce in January, the firm reported a nearly $1 billion dollar net loss in the fourth quarter following a rush for the exits at the end of last year that saw customer deposits plummet 68% to $3.8 billion. To cover the withdrawals, Silvergate had to sell $5.2 billion dollars of debt securities.

    The firm went to the Federal Home Loan Bank for an additional $4.3 billion. That loan drew attention from lawmakers like Sen. Elizabeth Warren, D-Mass, who said this “further introduced crypto market risk into the traditional banking system.”

    Investment firms Citadel Securities and BlackRock recently took major stakes in Silvergate, buying up 5.5% and 7%, respectively.

    WATCH: Silvergate plunges in pre-market trading after delaying its annual report

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  • BlackRock says European companies are showing ‘surprise resilience’ — and better value than the U.S.

    BlackRock says European companies are showing ‘surprise resilience’ — and better value than the U.S.

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    A trader works as a screen displays the trading information for BlackRock on the floor of the New York Stock Exchange (NYSE) in New York City, October 14, 2022.

    Brendan McDermid | Reuters

    LONDON — European corporate earnings were surprisingly resilient in the fourth quarter of 2022, and the continent’s stock outperformance of the U.S. looks set to continue, according to BlackRock.

    With earnings season winding down, the Wall Street giant highlighted in a note Tuesday that European fourth-quarter earnings showed corporate health extended beyond the region’s bedrock sectors of banking and energy.

    “Companies in Europe surprised analysts with their recent earnings performance. Regional stock markets have been on a good run year-to-date but remain at a discount both on a historical basis and versus U.S. peers,” said Helen Jewell, EMEA deputy chief investment officer at BlackRock Fundamental Equities.

    Banks and energy enjoyed a bumper fourth-quarter, BlackRock noted that earnings on the pan-European Stoxx 600 index were up by around 8% annually by the end of February, even without the energy sector.

    “Europe is the only region globally where 2024 earnings revisions are just back in positive territory,” Jewell said.

    “Earnings in the U.K. have also been a positive surprise, even when adjusted for the size of the financial and energy sectors.”

    Jewell suggested that the momentum for European banks, which have been buoyed by positive interest rates, is likely to continue, as valuations remain attractive.

    The Euro Stoxx Banks index was up almost 24% year-to-date as of Tuesday morning, but Jewell noted that earnings strength means price-to-earnings ratios remain below long-term averages for the sector.

    Price-to-earnings ratio determines whether a company is overvalued or undervalued by measuring its current share price relative to its earnings per share.

    “We turned favourable on financials in the middle of last year, and believe the sector is capable of further outperformance in 2023 as the European Central Bank remains committed to inflation control and higher rates may put more banks in a position to return cash to shareholders,” Jewell said.

    Energy majors in the U.K. and Europe posted record earnings in the fourth quarter on the back of soaring oil and gas prices, but a warmer winter has since led to lower-than-expected physical demand.

    Over the medium term, BlackRock still anticipates supply tightness and sees European oil majors continuing to generate massive cash flows.

    European Banks are more attractive due to American capitalism, says Smead Capital's Cole Smead

    “These companies trade at a discount to U.S. peers and continue to allocate substantial investment toward renewable forms of energy,” Jewell added.

    Despite the resilience thus far, she highlighted the importance of profit margins in 2023, as central banks continue to tighten monetary policy and bring to an end an era of cheap money.

    Around 60% of European companies beat fourth-quarter sales expectations, while only around 50% beat on profits, according to MSCI data compiled at the end of February. A similar picture is emerging in the U.K.

    “This tallies with what companies across sectors have told us about the growing impact of wage inflation at a time when slowing economic growth has made it harder to pass on costs. We believe that companies with a higher exposure to wage costs may continue to struggle in 2023,” Jewell said.

    “We see many opportunities for investors in the region, although it’s important to be selective as profit-margin pressure may bring dispersion across sectors and within industries.”

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  • Covid’s ‘legacy of weirdness’: Layoffs spread, but some employers can’t hire fast enough

    Covid’s ‘legacy of weirdness’: Layoffs spread, but some employers can’t hire fast enough

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    A sign for hire is posted on the window of a Chipotle restaurant in New York, April 29, 2022.

    Shannon Stapleton | Reuters

    Job cuts are rising at some of the biggest U.S. companies, but others are still scrambling to hire workers, the result of wild swings in consumer priorities since the Covid pandemic began three years ago.

    Tech giants Meta, Amazon and Microsoft, along with companies ranging from Disney to Zoom, have announced job cuts over the past few weeks. In total, U.S.-based employers cut nearly 103,000 jobs in January, the most since September 2020, according to a report released earlier this month from outplacement firm Challenger, Gray & Christmas.

    Meanwhile, employers added 517,000 jobs last month, nearly three times the number analysts expected. This points to a labor market that’s still tight, particularly in service sectors that were hit hard earlier in the pandemic, such as restaurants and hotels.

    The dynamic is making it even harder to predict the path of the U.S. economy. Consumer spending has remained robust and surprised some economists, despite headwinds such as higher interest rates and persistent inflation.

    All of it is part of the Covid pandemic’s “legacy of weirdness,” said David Kelly, global chief strategist at J.P. Morgan Asset Management.

    The Bureau of Labor Statistics is scheduled to release its next nonfarm payroll on March 3.

    Some analysts and economists warn that weakness in some sectors, strains on household budgets, a drawdown on savings and high interest rates could further fan out job weakness in other sectors, especially if wages don’t keep pace with inflation.

    Wages for workers in the leisure and hospitality industry rose to $20.78 per hour in January from $19.42 a year earlier, according to the most recent data from the Bureau of Labor Statistics.

    “There’s a difference between saying the labor market is tight and the labor market is strong,” Kelly said.

    Many employers have faced challenges in attracting and retaining staff over the past few years, with challenges including workers’ child care needs and competing workplaces that might have better schedules and pay.

    With interest rates rising and inflation staying elevated, consumers could pull back spending and spark job losses or reduce hiring needs in otherwise thriving sectors.

    “When you lose a job you don’t just lose a job — there’s a multiplier effect,” said Aneta Markowska, chief economist at Jefferies.

    That means while there might be trouble in some tech companies, that could translate to lower spending on business travel, or if job loss rises significantly, it could prompt households to pull back sharply on spending on services and other goods.

    The big reset

    Some of the recent layoffs have come from companies that beefed up staffing over the course of the pandemic, when remote work and e-commerce were more central to consumer and company spending.

    Amazon last month announced 18,000 job cuts across the company. The Seattle-based company employed 1.54 million people at the end of last year, nearly double the number at the end of 2019, just before the pandemic, according to company filings.

    Microsoft said it’s cutting 10,000 jobs, about 5% of its workforce. The software giant had 221,000 employees as of the end of June last year, up from 144,000 before the pandemic.

    Tech “used to be a grow-at-all-costs sector, and it’s maturing a little bit,” said Michael Gapen, head of U.S. economic research at Bank of America Global Research.

    Other companies are still adding employees. Boeing, for example, is planning to hire 10,000 people this year, many of them in manufacturing and engineering. It will also cut around 2,000 corporate jobs, mostly in human resources and finance departments, through layoffs and attrition. The growth aims to help the aerospace giant ramp up output of new aircraft for a rebound in orders with large sales to airlines like United and Air India.

    Airlines and aerospace companies were devastated early in the pandemic when travel dried up and are now playing catch-up. Airlines are still scrambling for pilots, a shortage that has limited capacity, while demand for experiences such as travel and dining has surged.

    Chipotle is planning to hire 15,000 workers as it gears up for a busier spring season and to support its expansion.

    Holding on

    Businesses large and small are also finding they have to raise wages to attract and retain workers. Industries that fell out of favor with consumers and other businesses, such as restaurants and aerospace, are rebuilding workforces after shedding workers. Walmart said it would raise minimum pay for store employees to $14 an hour to attract and retain workers.

    The Miner’s Hotel in Butte, Montana, raised hourly pay for housekeepers by $1.50 to $12.50 for that position in the last six weeks because of a high turnover rate, Cassidy Smith, its general manager.

    Airports and concessionaires have also been racing to hire workers in the travel rebound. Phoenix Sky Harbor International Airport has been holding monthly job fairs and offers some staff child-care scholarships to help hiring.

    Austin-Bergstrom International Airport, where schedules by seats this quarter has grown 48% from the same period of 2019, has launched a number of initiatives, such as $1,000 referral bonuses, and signing and retention incentives for referred staff.

    The airport also raised hourly wages for airport facilities representatives from $16.47 in 2022 to $20.68 in 2023.

    “Austin has a high cost of living,” said Kevin Russell, the airport’s deputy chief of talent.

    He said employee retention has improved.

    Electricians, plumbers and heating-and-air conditioning technicians in particular, however, have been difficult to retain because they can work at other places that aren’t 24/7 and at at higher pay, he said.

    Many companies’ new workers need to be trained, a time-consuming element for some industries to ramp back up, even if it’s gotten easier to attract new employees.

    “Hiring is not a constraint anymore,” Boeing CEO Dave Calhoun said on an earnings call in January. “People are able to hire the people they need. It’s all about the training and ultimately getting them ready to do the sophisticated work that we demand.”

    — CNBC’s Amelia Lucas contributed to this article.

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  • Solar tech company Nextracker prices above range at $24 a share in good sign for IPO market

    Solar tech company Nextracker prices above range at $24 a share in good sign for IPO market

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    choja | E+ | Getty Images

    The solar technology company Nextracker priced its initial public offering just above its stated $20 to $23 per share range, people with knowledge of the transaction told CNBC.

    The order book for Fremont, California-based Nextracker was “well subscribed,” meaning demand allowed the company to exceed expectations on pricing, sources who declined to be identified speaking about the process told CNBC earlier Wednesday.

    The IPO is expected to raise about $638 million by selling 26.6 million shares at $24 each, which is well above the $535 million upper limit the company said it was seeking in a filing last week. That is also before the so-called greenshoe option that allows bankers to sell more stock, the people said.

    The development is a good sign for the moribund IPO market. Proceeds from public listings fell 94% last year after the Federal Reserve began its most aggressive rate-increasing campaign in decades. Investors soured on the shares of unprofitable tech companies in particular, many of which are still underwater after listing in 2020 and 2021.

    The Nextracker IPO is arguably the first meaningful public listing this year as it is set to be the biggest U.S. IPO since autonomous driving firm Mobileye raised $990 million in October.

    Bookrunners first secured anchor investments in Nextracker from BlackRock and Norges Bank Investment Management, which helped drive demand for shares, the people said.

    Nextracker will begin trading on the Nasdaq exchange Thursday morning under the symbol NXT, according to one of the people.

    The company, which was a subsidiary of manufacturer Flex, sells hardware and software that enables solar panels to follow the movement of the sun, improving the output of solar power plants.

    JPMorgan Chase was lead advisor on the transaction, according to a regulatory filing.

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  • Take profits on Starbucks after its huge run, and check out these 3 other stocks

    Take profits on Starbucks after its huge run, and check out these 3 other stocks

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    A Starbucks store is seen inside the Tom Bradley terminal at LAX airport in Los Angeles, California.

    Lucy Nicholson | Reuters

    In Friday’s “Morning Meeting,” we dug into our inbox and found an excellent question raised by a member of the Investing Club.

    Starbucks – like Halliburton – has had a nice run lately. The Club trimmed some Halliburton on Thursday. Why not trim Starbucks too? I have a double-digit percent gain on shares accumulated over the past five months. It seems like I should take some off the table. I would appreciate your perspective on what I see as a similar situation, but two different stocks.

    -Clay

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  • Dow closes up more than 100 points as earnings season begins, stocks book best week of gains in 2 months

    Dow closes up more than 100 points as earnings season begins, stocks book best week of gains in 2 months

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    U.S. stocks finished higher Friday, as investors weighed a flurry of bank earnings results for the fourth quarter and fresh data on consumer sentiment and inflation expectations.

    All three major benchmarks also booked their best weekly percentage gains since Nov. 11, according to Dow Jones Market Data.

    How stock indexes traded
    • The Dow Jones Industrial Average
      DJIA,
      +0.33%
      rose 112.64 points, or 0.3%, to close at 34,302.61.

    • The S&P 500
      SPX,
      +0.40%
      added 15.92 points, or 0.4%, to finish at 3,999.09.

    • The Nasdaq Composite
      COMP,
      -1.10%
      gained 78.05 points, or 0.7%, to end at 11,079.16.

    For the week, the Dow rose 2%, the S&P 500 advanced 2.7% and the Nasdaq gained 4.8% gain.

    Read: Goldman Sachs sees these ‘prospective’ total returns across assets in 2023

    What drove markets

    Major stock indexes posted their best week of gains in two months on Friday after companies began reporting their fourth-quarter results, with big banks kicking off the earnings season.

    No big surprises have come from the banks’ earnings results so far, with Bank of America Corp. and JPMorgan Chase & Co. indicating a potentially mild recession this year, according to Anthony Saglimbene, chief market strategist at Ameriprise Financial. 

    “I think the base case for most of the market right now is that we’re going to see a mild recession,” Saglimbene said in a phone interview Friday. “I don’t think anything that was said across bank earnings today surprised investors.”

    Typically, the release of megabank earnings marks the unofficial start of the U.S. earnings reporting season, and market analysts will be watching closely this quarter for indications of how America’s largest companies are bracing for an expected economic downturn driven by higher interest rates.

    JPMorgan
    JPM,
    +2.52%    ,
    Bank of America
    BAC,
    +2.20%    ,
    Wells Fargo & Co.
    WFC,
    +3.25%
    and Citigroup
    C,
    +1.69%
    were among banks that reported their fourth-quarter earnings Friday. JPMorgan was the top performer in the Dow Jones Industrial Average, with its shares closing 2.5% higher, FactSet data show.

    Read: JPMorgan, Wells Fargo, Bank of America and Citi beat earnings expectations, but worries about ‘headwinds’ remain

    Earnings will continue to be a “big focus” for markets this month, according to Saglimbene. “Analysts took down estimates pretty aggressively in the fourth quarter,” he said. “So the bar is pretty low for companies. We’ll see if they can hurdle past that.”

    In U.S. economic data released Friday, the University of Michigan consumer sentiment index climbed in January to its highest level in nine months, as expectations for the rate of inflation one year out moderated.

    “Signs that inflation has peaked and is moderating slowly kind of eases some of the anxiety that we’re going to see runaway inflation this year,” said Saglimbene.

    A reading from the consumer-price index on Thursday showed U.S. inflation fell in December. Many investors are expecting that the Federal Reserve will slow its pace of interest rate hikes this year as the cost of living has cooled.

    Read: Inflation slows again and clears path for slower Fed rate hikes

    Stocks on Thursday pushed higher after St. Louis Federal Reserve Bank President James Bullard said the probability of a soft landing for the economy has increased due to “encouraging” inflation data.

    Read: Why the stock market isn’t impressed with the first monthly decline in consumer prices in more than 2 years

    Steve Sosnick, chief strategist at Interactive Brokers, said by phone Friday that he still favors consumer-staples stocks and companies with “more steady streams than more cyclical streams” of income. “If you’re looking at an economy that’s likely to slow down, it’s really hard for me to think that somehow ‘the cyclicals’ will be immune from the economic cycle,” he said.

    Read: Why earnings season could be a ‘market-moving event’

    Companies in focus
    • JPMorgan
      JPM,
      +2.52%
      shares gained 2.5% after reporting fourth-quarter earnings and revenue before the bell that topped Wall Street expectations. The bank said a mild recession is now the “central case.”

    • Wells Fargo
      WFC,
      +3.25%
      shares rose 3.3% after reporting falling profits, as it was hit by a recent settlement and the need to build reserves.

    • Bank of America
      BAC,
      +2.20%
      shares gained 2.2% after reporting earnings per share of 85 cents last quarter, above the 77 cents a share expected by analysts. Revenue also beat expectations. However, the bank’s net interest income fell slightly below expectations despite jumping interest rates.

    • Delta Air Lines Inc.
      DAL,
      -3.54%
      reported fourth-quarter profit and revenue before the bell that beat expectations. Shares of the airline fell 3.5%.

    • Tesla Inc.
      TSLA,
      -0.94%
      shares fell after the company cut prices in the U.S. and Europe again, according to listings on the company’s website Thursday night. Tesla finished down 0.9%.

    • Shares of UnitedHealth Group Inc.
      UNH,
      -1.23%
      dropped 1.2% after the health-insurance giant shared its results.

    • BlackRock Inc.
      BLK,
      +0.00%
      shares closed about flat after the asset-management giant reported a decline in fourth-quarter results.

    —Barbara Kollmeyer contributed to this article.

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  • Zelenskyy, BlackRock CEO Fink agree to coordinate Ukraine investment

    Zelenskyy, BlackRock CEO Fink agree to coordinate Ukraine investment

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    Volodymyr Zelenskiy, Ukraine’s president, meets with US President Joe Biden in the Oval Office of the White House in Washington, DC, US, on Wednesday, Dec. 21, 2022.

    Oliver Contreras | Bloomberg | Getty Images

    Ukrainian President Volodymyr Zelenskyy and BlackRock CEO Larry Fink agreed to coordinate investment in rebuilding Ukraine, Kyiv announced on Wednesday following a meeting between the two men.

    A readout from the Ukrainian president’s official website said Zelenskyy and Fink had “agreed to focus in the near term on coordinating the efforts of all potential investors and participants in the reconstruction of our country, channelling investment into the most relevant and impactful sectors of the Ukrainian economy.”

    BlackRock Financial Markets Advisory and the Ukrainian Ministry of Economy signed a memorandum of understanding in November, after Fink and Zelenskyy met in September to discuss driving public and private investments into Ukraine to rebuild the country after Russia’s highly destructive invasion.

    BlackRock, one of the world’s largest investment managers, has been providing “advisory support for designing an investment framework, with a goal of creating opportunities for both public and private investors to participate in the future reconstruction and recovery of the Ukrainian economy,” the company said in a statement last month.

    A spokesperson for BlackRock was not immediately available for comment.

    Zelenskyy last week visited Washington D.C. to meet with U.S. President Joe Biden and deliver an address to Congress, as the U.S. House of Representatives gave final approval on Friday to a $45 billion aid package for Ukraine.

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  • Here are Friday’s biggest analyst calls: Apple, Amazon, Meta, Nvidia, Carvana, Delta, Walmart & more

    Here are Friday’s biggest analyst calls: Apple, Amazon, Meta, Nvidia, Carvana, Delta, Walmart & more

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  • Activist investor calls for BlackRock CEO Fink to step down over ESG ‘hypocrisy’

    Activist investor calls for BlackRock CEO Fink to step down over ESG ‘hypocrisy’

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    LONDON — BlackRock CEO Larry Fink is facing calls to step down from activist investor Bluebell Capital over the company’s alleged “hypocrisy” on its environmental, social and governance (ESG) messaging.

    Fink has become an outspoken proponent of “stakeholder capitalism” and in his annual letter to CEOs earlier this year, pushed back against accusations that the giant asset manager was using its size to push a political agenda.

    However, in a letter to Fink dated Nov. 10, shareholder Bluebell expressed concern about the “reputational risk (including greenwashing risk) to which BlackRock under the leadership of Larry Fink have unreasonably exposed the company.”

    In a statement sent to CNBC on Wednesday, BlackRock responded: “In the past 18 months, Bluebell has waged a number of campaigns to promote their climate and governance agenda.”

    Larry Fink, Chairman and C.E.O. of BlackRock arrives at the DealBook Summit in New York City, November 30, 2022.

    David Dee Delgado | Reuters

    “BlackRock Investment Stewardship did not support their campaigns as we did not consider them to be in the best economic interests of our clients,” it said.

    London-based Bluebell — an activist fund with around $250 million in assets under management that holds a tiny stake in BlackRock — has previously targeted the likes of Richemont and Solvay, and had a hand in successfully forcing a management restructure at Danone.

    Partner and co-founder Giuseppe Bivona told CNBC Wednesday that the firm was concerned about “the gap between what BlackRock consistently says on ESG and what they actually do,” based on Bluebell’s encounters with the Wall Street giant during activist campaigns directed at these companies.

    “We see BlackRock endorsing a number of bad practices from a governance, social and environmental perspective which is not actually in tune with what they say,” Bivona said.

    “In our latest activist campaign at Richemont, they have been opposing the increase of board representation for investors owning 90% of the company from one to three. I really don’t think this is in the best interest of the investor, upon which on a fiduciary basis they invest the money, and of course it’s not in the best interest of any shareholder.”

    Bivona also took aim at BlackRock’s 2020 promise to clients to exit thermal coal investments, which it says in its client letter on sustainability that the “long-term economic or investment rationale” no longer justifies.

    Bluebell noted that this commitment excludes passive funds such as index trackers and ETFs, which constitute 64% of BlackRock’s more than $10 trillion in assets under management.

    The company remains a major shareholder in the likes of Glencore and “coal intensive miners” Exxaro, Peabody and Whitehaven, Bivaro’s letter to Fink on Nov. 10 noted. A report earlier this year found that giant global asset managers including BlackRock were still pumping tens of billions of dollars into new coal projects and major oil and gas companies.

    BlackRock touts firm's voting choice program in response to ESG critics

    “Let me say that when the price of coal was around $76 per ton, BlackRock was talking about essentially divesting,” Bivona told CNBC.

    “Now that the price of coal is $380 per ton, they are talking about responsible ownership. I think there is a high correlation between BlackRock’s strategy on coal and the price of coal.”

    Bluebell’s letter also took aim at BlackRock for having “politicized the ESG debate,” after its public advocacy led to a swathe of Republican-controlled U.S. states divesting assets managed by BlackRock in protest at the asset manager’s ESG policies.

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  • Tech’s reality check: How the industry lost $7.4 trillion in one year

    Tech’s reality check: How the industry lost $7.4 trillion in one year

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    Pedestrians walk past the NASDAQ MarketSite in New York’s Times Square.

    Eric Thayer | Reuters

    It seems like an eternity ago, but it’s just been a year.

    At this time in 2021, the Nasdaq Composite had just peaked, doubling since the early days of the pandemic. Rivian’s blockbuster IPO was the latest in a record year for new issues. Hiring was booming and tech employees were frolicking in the high value of their stock options.

    Twelve months later, the landscape is markedly different.

    Not one of the 15 most valuable U.S. tech companies has generated positive returns in 2021. Microsoft has shed roughly $700 billion in market cap. Meta’s market cap has contracted by over 70% from its highs, wiping out over $600 billion in value this year.

    In total, investors have lost roughly $7.4 trillion, based on the 12-month drop in the Nasdaq.

    Interest rate hikes have choked off access to easy capital, and soaring inflation has made all those companies promising future profit a lot less valuable today. Cloud stocks have cratered alongside crypto.

    There’s plenty of pain to go around. Companies across the industry are cutting costs, freezing new hires, and laying off staff. Employees who joined those hyped pre-IPO companies and took much of their compensation in the form of stock options are now deep underwater and can only hope for a future rebound.

    IPOs this year slowed to a trickle after banner years in 2020 and 2021, when companies pushed through the pandemic and took advantage of an emerging world of remote work and play and an economy flush with government-backed funds. Private market darlings that raised billions in public offerings, swelling the coffers of investment banks and venture firms, saw their valuations marked down. And then down some more.

    Rivian has fallen more than 80% from its peak after reaching a stratospheric market cap of over $150 billion. The Renaissance IPO ETF, a basket of newly listed U.S. companies, is down 57% over the past year.

    Tech executives by the handful have come forward to admit that they were wrong.

    The Covid-19 bump didn’t, in fact, change forever how we work, play, shop and learn. Hiring and investing as if we’d forever be convening happy hours on video, working out in our living room and avoiding airplanes, malls and indoor dining was — as it turns out — a bad bet.

    Add it up and, for the first time in nearly two decades, the Nasdaq is on the cusp of losing to the S&P 500 in consecutive years. The last time it happened the tech-heavy Nasdaq was at the tail end of an extended stretch of underperformance that began with the bursting of the dot-com bubble. Between 2000 and 2006, the Nasdaq only beat the S&P 500 once.

    Is technology headed for the same reality check today? It would be foolish to count out Silicon Valley or the many attempted replicas that have popped up across the globe in recent years. But are there reasons to question the magnitude of the industry’s misfire?

    Perhaps that depends on how much you trust Mark Zuckerberg.

    Meta’s no good, very bad, year

    It was supposed to be the year of Meta. Prior to changing its name in late 2021, Facebook had consistently delivered investors sterling returns, beating estimates and growing profitably with historic speed.

    The company had already successfully pivoted once, establishing a dominant presence on mobile platforms and refocusing the user experience away from the desktop. Even against the backdrop of a reopening world and damaging whistleblower allegations about user privacy, the stock gained over 20% last year.

    But Zuckerberg doesn’t see the future the way his investors do. His commitment to spend billions of dollars a year on the metaverse has perplexed Wall Street, which just wants the company to get its footing back with online ads.

    The big and immediate problem is Apple, which updated its privacy policy in iOS in a way that makes it harder for Facebook and others to target users with ads.

    With its stock down by two-thirds and the company on the verge of a third straight quarter of declining revenue, Meta said earlier this month it’s laying off 13% of its workforce, or 11,000 employees, its first large-scale reduction ever.

    “I got this wrong, and I take responsibility for that,” Zuckerberg said.

    Mammoth spending on staff is nothing new for Silicon Valley, and Zuckerberg was in good company on that front.

    Software engineers had long been able to count on outsized compensation packages from major players, led by Google. In the war for talent and the free flow of capital, tech pay reached new heights.

    Recruiters at Amazon could throw more than $700,000 at a qualified engineer or project manager. At gaming company Roblox, a top-level engineer could make $1.2 million, according to Levels.fyi. Productivity software firm Asana, which held its stock market debut in 2020, has never turned a profit but offered engineers starting salaries of up to $198,000, according to H1-B visa data.

    Fast forward to the last quarter of 2022, and those halcyon days are a distant memory.

    Layoffs at Cisco, Meta, Amazon and Twitter have totaled nearly 29,000 workers, according to data collected by the website Layoffs.fyi. Across the tech industry, the cuts add up to over 130,000 workers. HP announced this week it’s eliminating 4,000 to 6,000 jobs over the next three years.

    For many investors, it was just a matter of time.

    “It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people,” Brad Gerstner, a tech investor at Altimeter Capital, wrote last month.

    Gerstner’s letter was specifically targeted at Zuckerberg, urging him to slash spending, but he was perfectly willing to apply the criticism more broadly.

    “I would take it a step further and argue that these incredible companies would run even better and more efficiently without the layers and lethargy that comes with this extreme rate of employee expansion,” Gerstner wrote.

    Microsoft's president responds to big tech layoffs

    Activist investor TCI Fund Management echoed that sentiment in a letter to Google CEO Sundar Pichai, whose company just recorded its slowest growth rate for any quarter since 2013, other than one period during the pandemic.

    “Our conversations with former executives suggest that the business could be operated more effectively with significantly fewer employees,” the letter read. As CNBC reported this week, Google employees are growing worried that layoffs could be coming.

    SPAC frenzy

    Remember SPACs?

    Those special purpose acquisition companies, or blank-check entities, created so they could go find tech startups to buy and turn public were a phenomenon of 2020 and 2021. Investment banks were eager to underwrite them, and investors jumped in with new pools of capital.

    SPACs allowed companies that didn’t quite have the profile to satisfy traditional IPO investors to backdoor their way onto the public market. In the U.S. last year, 619 SPACs went public, compared with 496 traditional IPOs.

    This year, that market has been a bloodbath.

    The CNBC Post SPAC Index, which tracks the performance of SPAC stocks after debut, is down over 70% since inception and by about two-thirds in the past year. Many SPACs never found a target and gave the money back to investors. Chamath Palihapitiya, once dubbed the SPAC king, shut down two deals last month after failing to find suitable merger targets and returned $1.6 billion to investors.

    Then there’s the startup world, which for over a half-decade was known for minting unicorns.

    Last year, investors plowed $325 billion into venture-backed companies, according to EY’s venture capital team, peaking in the fourth quarter of 2021. The easy money is long gone. Now companies are much more defensive than offensive in their financings, raising capital because they need it and often not on favorable terms.

    Venture capitalists are cashing in on clean tech, says VC Vinod Khosla

    “You just don’t know what it’s going to be like going forward,” EY venture capital leader Jeff Grabow told CNBC. “VCs are rationalizing their portfolio and supporting those that still clear the hurdle.”

    The word profit gets thrown around a lot more these days than in recent years. That’s because companies can’t count on venture investors to subsidize their growth and public markets are no longer paying up for high-growth, high-burn names. The forward revenue multiple for top cloud companies is now just over 10, down from a peak of 40, 50 or even higher for some companies at the height in 2021.

    The trickle down has made it impossible for many companies to go public without a massive markdown to their private valuation. A slowing IPO market informs how earlier-stage investors behave, said David Golden, managing partner at Revolution Ventures in San Francisco.

    “When the IPO market becomes more constricted, that circumscribes one’s ability to find liquidity through the public market,” said Golden, who previously ran telecom, media and tech banking at JPMorgan. “Most early-stage investors aren’t counting on an IPO exit. The odds against it are so high, particularly compared against an M&A exit.”

    There have been just 173 IPOs in the U.S. this year, compared with 961 at the same point in 2021. In the VC world, there haven’t been any deals of note.

    “We’re reverting to the mean,” Golden said.

    An average year might see 100 to 200 U.S. IPOs, according to FactSet research. Data compiled by Jay Ritter, an IPO expert and finance professor at the University of Florida, shows there were 123 tech IPOs last year, compared with an average of 38 a year between 2010 and 2020.

    Buy now, pay never

    There’s no better example of the intersection between venture capital and consumer spending than the industry known as buy now, pay later.

    Companies such as Affirm, Afterpay (acquired by Block, formerly Square) and Sweden’s Klarna took advantage of low interest rates and pandemic-fueled discretionary incomes to put high-end purchases, such as Peloton exercise bikes, within reach of nearly every consumer.

    Affirm went public in January 2021 and peaked at over $168 some 10 months later. Affirm grew rapidly in the early days of the Covid-19 pandemic, as brands and retailers raced to make it easier for consumers to buy online.

    By November of last year, buy now, pay later was everywhere, from Amazon to Urban Outfitters‘ Anthropologie. Customers had excess savings in the trillions. Default rates remained low — Affirm was recording a net charge-off rate of around 5%.

    Affirm has fallen 92% from its high. Charge-offs peaked over the summer at nearly 12%. Inflation paired with higher interest rates muted formerly buoyant consumers. Klarna, which is privately held, saw its valuation slashed by 85% in a July financing round, from $45.6 billion to $6.7 billion.

    The road ahead

    That’s all before we get to Elon Musk.

    The world’s richest person — even after an almost 50% slide in the value of Tesla — is now the owner of Twitter following an on-again, off-again, on-again drama that lasted six months and was about to land in court.

    Musk swiftly fired half of Twitter’s workforce and then welcomed former President Donald Trump back onto the platform after running an informal poll. Many advertisers have fled.

    And corporate governance is back on the docket after this month’s sudden collapse of cryptocurrency exchange FTX, which managed to grow to a $32 billion valuation with no board of directors or finance chief. Top-shelf firms such as Sequoia, BlackRock and Tiger Global saw their investments wiped out overnight.

    “We are in the business of taking risk,” Sequoia wrote in a letter to limited partners, informing them that the firm was marking its FTX investment of over $210 million down to zero. “Some investments will surprise to the upside, and some will surprise to the downside.”

    Even with the crypto meltdown, mounting layoffs and the overall market turmoil, it’s not all doom and gloom a year after the market peak.

    Golden points to optimism out of Washington, D.C., where President Joe Biden’s Inflation Reduction Act and the Chips and Science Act will lead to investments in key areas in tech in the coming year.

    Funds from those bills start flowing in January. Intel, Micron and Taiwan Semiconductor Manufacturing Company have already announced expansions in the U.S. Additionally, Golden anticipates growth in health care, clean water and energy, and broadband in 2023.

    “All of us are a little optimistic about that,” Golden said, “despite the macro headwinds.”

    WATCH: There’s more pain ahead for tech

    There's more pain ahead for tech, warns Bernstein's Dan Suzuki

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