Finance

Sahm rule creator doesn’t think that the Fed needs an emergency rate cut

Published

2 months ago

August 7, 2024

The U.S. economy is not in a recession, economist says

The U.S. Federal Reserve does not need to make an emergency rate cut, despite recent weaker-than-expected economic data, according to Claudia Sahm, chief economist at New Century Advisors.

Speaking to CNBC “Street Signs Asia,” Sahm said “we don’t need an emergency cut, from what we know right now, I don’t think that there’s everything that will make that necessary.”

She said, however, there is a good case for a 50-basis-point cut, adding that the Fed needs to “back off” its restrictive monetary policy.

While the Fed is intentionally putting downward pressure on the U.S. economy using interest rates, Sahm warned the central bank needs to be watchful and not wait too long before cutting rates, as interest rate changes take a long time to work through the economy.

“The best case is they start easing gradually, ahead of time. So what I talk about is the risk [of a recession], and I still feel very strongly that this risk is there,” she said.

Sahm was the economist who introduced the so-called Sahm rule, which states that the initial phase of a recession has started when the three-month moving average of the U.S. unemployment rate is at least half a percentage point higher than the 12-month low.

Lower-than-expected manufacturing numbers, as well as higher-than-forecast unemployment fueled recession fears and sparked a rout in global markets early this week.

The U.S. employment rate stood at 4.3% in July, which crosses the 0.5-percentage-point threshold. The indicator is widely recognized for its simplicity and ability to quickly reflect the onset of a recession, and has never failed to indicate a recession in cases stretching back to 1953.

When asked if the U.S. economy is in a recession, Sahm said no, although she added that there is “no guarantee” of where the economy will go next. Should further weakening occur, then it could be pushed into a recession.

“We need to see the labor market stabilize. We need to see growth level out. The weakening is a real problem, particularly if what July showed us holds up, that that pace worsens.”

Finance

After rejecting Google takeover, Wiz says will IPO when ‘stars align’

Published

52 mins ago

October 18, 2024

Business Finance News

Wiz co-founder discusses the company's expansion into the UK

LONDON — Cybersecurity firm Wiz is seeking to hit $1 billion of annual recurring revenues next year, the company’s billionaire co-founder Roy Reznik told CNBC, adding that the firm will go public “when the stars align.”

Wiz makes software that connects to cloud storage providers like Amazon Web Services or Microsoft Azure and scans for everything it stores in the cloud, helping organizations identify and remove risks in their cloud environments. It was founded by four Israeli friends while they served in 8200, the intelligence unit of Israel’s army, and most of Wiz’s engineering personnel are still based in Tel Aviv, Israel.

Earlier this year, the company rejected a $23-billion acquisition bid from Google, which would have marked the tech giant’s largest-ever takeover. At the time, Wiz CEO Assaf Rappaport said the startup was “flattered” by the offer, but would remain an independent company and aim to list instead.

Speaking with CNBC at Wiz’s new office space in London, Reznik said that the company has received offers from “many people that want to get their hands on Wiz stock” — but that, while “very flattering,” the firm still thinks it can do it alone by going public.

“We’ve already broken a few records as a private company, and we believe we can also break a few more records as an independent public company as well,” Reznik said.

Four-year-old Wiz has raised $1.9 billion in venture capital to date, including $1 billion secured this year in a funding round led by Andreessen Horowitz, Lightspeed Venture Partners and Thrive Capital at a valuation of $12 billion.

In 2022, Wiz said it had reached $100 million in annual recurring revenue (ARR), up from just $1 million in 18 months. At the time, the startup said it was “the fastest software company to achieve this feat.”

Reznik, who is the vice president of research and development at Wiz, said the firm now hopes to double from the $500 million of ARR it achieved this year and hit $1 billion in ARR in 2025, which CEO Rappaport cited as a key condition before the company goes public.

UK expansion

Wiz has been expanding its presence internationally, with a particular focus on Europe, from where it sources 35% of its revenues. Last month, the firm opened its first European office in London.

“I think the talent here is amazing, and the ecosystem is amazing,” Reznik told CNBC. “We have always been very much involved in Europe — and specifically the U.K. — and I feel like it’s a natural evolvement of Wiz to double down even more here in London and the U.K.”

The U.K. represents a major growth opportunity when it comes to cybersecurity, Reznik said, adding that recent events like the cyberattack on National Health Service hospitals and an incident affecting Transport for London have “roof topped” the level of interest in the kinds of products Wiz offers.

“The cloud market is going to reach $1 trillion over the next next few years,” Reznik, who moved from Israel to the U.K. just three months ago, told CNBC. “This year is going to be around $700 million, while security is just 4% out of that, I would say. So that makes it a $30 billion market, which is huge.”

Speaking about the U.K. market, Reznik said: “We see a lot of interest here. Many of the largest banks and retailers, are Wiz customers. But we’re also seeing a huge potential for growth.”

Wiz’s customers include online retailer ASOS and digital bank Revolut as customers in the U.K.