I had the curiosity to ask ChatGP about the causality chain in case of an economical recession.
Below are the answers
In the event of an economic recession, the impact on various sectors of the economy tends to follow a certain sequence, known as the causality chain. For IT/Telecom companies like Cisco, the impact generally comes after several other sectors have already experienced slowdowns. Here’s how this causality chain might unfold:
1. Consumer Goods and Retail
Initial Impact: The first sector typically affected in a recession is consumer goods and retail. As consumers become more cautious with their spending, demand for non-essential goods declines. Retailers may experience reduced sales, leading to a decrease in orders from manufacturers.
Cause: This is primarily driven by reduced consumer confidence, job losses, or fear of job loss, leading to decreased disposable income.
2. Manufacturing and Industrial Sectors
Subsequent Impact: As consumer demand falls, manufacturers reduce production, leading to a slowdown in the industrial sector. Companies in these sectors may delay or cut back on capital expenditures, including investments in new technology and infrastructure.
Effect on IT/Telecom: Companies like Cisco, which supply networking and communication infrastructure, might begin to see the first signs of impact as manufacturers delay or cancel upgrades to their IT systems.
3. Financial Services
Further Down the Chain: The financial services sector, which is highly sensitive to changes in economic conditions, may also begin to tighten budgets. This could include reducing investments in IT infrastructure, cybersecurity, and new digital initiatives.
Impact on Cisco: Reduced spending in the financial sector can lead to decreased demand for high-end networking equipment and services provided by companies like Cisco.
4. Corporate Sector (General Business)
Broad Impact: As the recession deepens, businesses across various sectors (including services, healthcare, and others) may begin to cut back on their IT budgets. This can include delaying upgrades, reducing IT staff, and scaling back on new projects.
Direct Impact on IT/Telecom: Cisco could see a direct impact at this stage, as corporate clients reduce spending on networking equipment, enterprise solutions, and telecommunication services. This could lead to a slowdown in sales and possibly affect Cisco’s revenue and profitability.
5. Technology and IT Sector
Delayed Impact: The IT and telecom sector itself might start to feel the effects more significantly as the recession continues. Companies in this sector often rely on contracts and long-term projects that provide some buffer against immediate impacts. However, as the broader economic conditions worsen, even technology companies might face reduced demand for their products and services.
Secondary Effects: As businesses across the board cut IT spending, companies like Cisco may see a drop in new orders, leading to a slowdown in their own operations.
6. Public Sector
Lagging Impact: The public sector, including government and education, might be one of the last sectors to reduce spending. However, prolonged economic downturns can lead to budget cuts, impacting IT projects in these areas.
Final Impact: If government spending slows, this could further reduce opportunities for companies like Cisco, which often have large contracts with public sector entities.
Summary
Primary Sectors Affected First: Consumer Goods, Retail, Manufacturing, and Industrial.
Secondary Sectors: Financial Services, followed by the broader Corporate Sector.
Tertiary Impact: IT/Telecom companies like Cisco, which may experience reduced demand as their clients in other sectors cut back on IT spending.
In a recession, Cisco and similar companies are not usually among the first to feel the impact, but they are eventually affected as the slowdown permeates through other sectors, particularly those that are heavy users of IT infrastructure.
I am not sure if this factors are at play currently but I think they are stating to aggravate. This might cause a second wave of LRs. If I make it this time I won't make it next time, that is for sure. I would prefer to get out now to have enough time to find a job till the full recession, the real one hits us