Microsoft Layoff, Fitch Warning, and More
The job cuts at Microsoft (MSFT) are not yet over. Although the firm is among those in the technology sector slowing down job cuts this year, it will still reduce around 3% of its staff.
Microsoft will trim the headcount by 6,000 staff. This is mostly in its sales team. This lowers costs and raises profitability. However, it also suggests that the company needs to adjust to the dynamic marketplace. Sales for hardware, such as the Xbox console and Surface computer likely slowed, and customer growth occurred in cloud solutions. Azure, SQL Server, and artificial intelligence solutions likely need more sales staff.
Readers may also infer that Microsoft will replace staff with AI. More S&P 500 firms will do the same in the years ahead.
Fitch Warns About U.S. Fiscal Outlook
Fitch Ratings sounded the warning on the U.S. fiscal outlook. It anticipates major headwinds, led by the country’s large federal deficits in the coming years. The ratings agency did not expect enough fiscal policy changes for the remainder of the Trump administration to help, either. As a result, Fitch is forecasting higher revenue from tariffs, worth $160 billion. Tax cuts and a weaker GDP would result in a government deficit of 7.6% of GDP.
U.S. Treasury bonds will need to pay a higher yield to attract investors. Look for the 7-10 year (IEF) and 20+ year treasury bond ETF to underperform.
