Amazon earnings report will be very telling us what's going on in the economy, says investor

Evolution VC Partners founder Gregg Smith argued that Amazon is a key recession indicator and that the company's upcoming earnings report will be very telling of what's going on in the global economy.

Speaking on Wednesday on Varney Co., the investment expert stressed that Amazon s dialogue and what they tell investors in about a month s time will be very telling of what is going on with the economy. He believes that the earnings release will give us an interesting look at consumer spending and what is going to happen with the company's earnings release. Their Amazon Web Services business, AWS, is going to tell us what is going on with their $60 billion behemoth. Are companies starting to dial back their spending and try to cut costs? He continued.

He added that the tech giant's massive media business, which does in excess of $30 billion in revenues, will shed light into what is happening to the enterprise in terms of dialing back spend. Smith stressed that the big question lately is whether a recession is inevitable, as inflation sits at 40 year highs and as some corporations have started to downsize as the Federal ReserveFederal Reserve attempts to tame the scorching-hot inflation.

For two consecutive quarters, a recession refers to a contraction in gross domestic product GDP activity, the broadest measure of goods and services produced across the economy.

According to the Commerce Department's final reading on Wednesday, Smith provided the insight on Wednesday after it was revealed that GDP activity declined at a worse than expected 1.6% annual pace in the first quarter. The figure is slightly higher than the department's first and second readings.

Many economists and analysts are wondering if the Fed can achieve the elusive soft landing that is the sweet spot between tamping down demand to cool inflation and sending the economy into a downturn. Hiking interest rates can lead to higher rates on consumer and business loans, which slows the economy by forcing employers to cut back spending.

The Fed raised its benchmark interest rate by 75 basis points for the first time in nearly three decades as policymakers intensified their fight to cool inflation.

Federal Reserve Chairman Jay Powell earlier this month wanted to make sure Americans that higher rates will not trigger a recession and that tighter policy is necessary to tame prices.

Smith stated on Wednesday that he is a venture investor and that as he analyzes his portfolio of more than 200 private companies he realized that there is a very big difference between what they hear and what they see. Many are seeing incredible business, particularly the ones that deal with the consumer, that have consumer businesses, their businesses are very strong, he told host Stuart Varney.

He then argued that the companies are defensive and are preparing because of the rhetoric from the media and saber-rattling from some large venture capital firms that winter is coming.

That leads to preemptive layoffs, Smith said.

They are working on eliminating projects that they are working on. They are shedding real estate and getting smaller footprints - so that is putting pressure on the economy as they get defensive and get into a defensive position.