Fed eyes interest rate cut, TikTok heads to court: Catalysts

On today's episode of Catalysts, Hosts Seana Smith and Madison Mills break down key stories from how an interest rate cut and the election may impact markets to TikTok's legal battle against a potential ban in the US.

While tech has certainly spearheaded the market's record growth this year, many investors are gearing up for a potential rotation as interest rates ease. HSBC head of equity strategy for the Americas Nicole Inui explains that the market will likely broaden outside of tech, benefiting sectors like financials (XLF), utilities (XLU), and healthcare (XLV). She adds, "When we look at the market as a whole, it looks like it's trading at a very hefty premium. You take out the Mag Seven, you take out tech, valuations aren't as elevated compared to historical levels. So yes, tech, Mag Seven, you still see strong earnings growth."

EY chief economist Greg Daco expects the Federal Reserve to initiate a 25-basis-point cut as it kicks off its rate-easing cycle. However, he notes that the central bank walks a delicate tightrope: "If you ease monetary policy by 25 basis points, it does little to nothing in terms of consumer rates, auto loan rates, mortgage rates, very little. But the risks are asymmetric. If the Fed does not ease monetary policy by as much as markets are anticipating, then you'll actually see a repricing of rates and you're going to see upward movement in terms of rates, and that could damage consumer spending activity, housing activity, business investment. That is the real risk right now."

Meanwhile, TikTok is in court on Monday for a key hearing in its ongoing battle to block a law that could ban the app in the US. Rachel Tipograph, the CEO of e-commerce analytics company MikMak, tells Yahoo Finance that the odds of a TikTok disruption, either through a ban or a sale, are rising. Looking at Snapchat (SNAP) and Meta Platforms (META) stock, the analyst says, “There is an implied probability there that TikTok disruption is more likely than not in the next four months, and I feel that could manifest into either a complete sale, complete ban, or somewhere in between.” He says this means “eyeballs and money move away from TikTok” which helps Meta and Snapchat.

GenWealth Financial Advisors financial advisor and host of "Get Ready for the Future Show" Scott Inman joins Catalysts to discuss how the election may impact markets (^DJI,^GSPC, ^IXIC) and how investors can best prepare their portfolios for the rest of the year. He believes that markets "don't really care about who is in office," noting that they have performed well and GDP (gross domestic product) has grown regardless of a Democratic or Republican administration.

This post was written by Melanie Riehl

Video transcript

Welcome to catalyst.

I'm John alongside of Madison Mills for 30 minutes into the trading day three catalyst for the markets.

This week, it was central bank rate decisions, Tito Band hearing and also we're rapping up earning seasons.

What the next catalyst for the markets will be.

That's exactly right.

A big week for central banks as the Bank of England Bank of Japan and the US Federal Reserve are all set to announce changes to monetary policy and take to head to court today in an attempt to reverse the potential ban of the platform here in the US will tell you what the signals for other social media names.

And a second quarter earnings season starts to come to a close earnings growth for the magnificent seven.

Starting to slow.

What will be the catalyst to get the sector leading again?

We'll tell you all about that.

Next will big tech outside leadership in the market could become a thing of the past since the S and P 500 peaked on July 16th.

Big that has been under a bit of pressure in the mag seven ETF down about 5% while sectors like utilities in real estate have led the rebound in the S and P 500.

So earnings growth is expected to broad and beyond that in the third quarter through the end of the year and into 2025.

Let's talk about the next catalyst for the markets beyond the tech sector for that.

We want to bring in Nicole Anui.

She is the head of equity strategy for the Americas at HS BC Nicole.

It's great to see you here.

So talk to us just about what we are seeing within some of those larger cap tech names.

Of course, we also have the feds rate decision on Wednesday.

Lots to talk about what exactly that ultimately means here for those that had been leading the market higher for much of the last 18 months.

So what should investors prepare for ahead of that decision?

Well, you know, going to to the tech sector that, that you were mentioning, yes, you know, we are seeing a uh slower earnings growth for the mag seven from what we saw at the beginning of the year, still very robust growth.

Uh the tech sector uh as a sector in the second quarter, we saw earnings growing at a 20% rate.

So it's still a very robust level in terms of growth.

But what we're seeing now is this broadening of earnings growth.

So we're seeing other sectors like financials, utilities, health care growing at a very similar rate.

So tech is less of an outlier of what we saw in the, you know, in the beginning of the year and in 2023.

And now we're seeing this broadening of earnings growth into other sectors, which really plays into this expectation, what we've been seeing recently in this broadening of this equity rally uh in other sectors and not just focused on tech.

Um going to what you talked about the Fed.

Yes, the focus this week is going to be on the Fed.

Uh Is it going to be 25 basis points?

Is it gonna be 50 basis points?

Uh We still feel like it's going to be 25 basis points.

But really for equities, what's important is that the fed is cutting, not necessarily if it's 25 or 50.

And what's important is why is the fed cutting rates?

Is the fed cutting rates because we're in a recession or about to go into a recession or is the fed cutting rates because we're seeing inflation coming down to a level that they feel comfortable with bringing rates down and we're still in the latter camp.

We don't think there's going to be in the, we don't think there's going to be a recession.

We think the US avoids a recession and that combination of the fed cutting without a recession is a very powerful combination for equities and usually leads to a nice rally following the first fed rate cut.

A reminder that we really have to listen to those policy remarks as they will tell us about the fed's decision making process.

I do want to pull up a chart that we have though.

Nicole showing us the earnings growth outside of the magazine, which is exactly what you are talking about here.

And it points to this idea that while yes, we are seeing that rotation, those names outside of the mag seven that you can see on your screen here in the lighter blue color, we are starting to see more growth in those names.

But over time, it's just less growth overall.

Even if you include the mag seven is that potentially bearish signal for the broader market here.

No, I I mean, you know, we're all we're looking at everything on on a relative basis.

So is it less growth than the, the mag seven?

Yes, it's less growth than the mag seven.

But you see that reflected in the valuations, the valuations of the mag seven is one thing, the valuations of the rest of the market is another thing.

When we look at the market as a whole, it looks like it's trading at a very hefty premium.

You take out the mag seven, you take out tech uh valuations aren't as uh compared to historical levels.

So um yes, tech mag seven, you still see strong earnings.

So there is this gap overall when you look at the rest of the of the sectors but that's clearly reflected in, in terms of what we're seeing in, in valuation.

So, um, you know, again, II, I think this is, you know, I think this is the exciting part that we've had a rally that's been extremely concentrated year to date.

I mean, we went back 30 years and it was, we couldn't find a time where we saw that so few stocks uh represented so much of, of the equity rally here today.

And it's nice to see that we're now seeing kind of this broadening into other sectors into other companies and we're seeing this broadening of earnings growth.

I think that that shows a very healthy um uh sector rally going into the, the end of the year.

So then Nicole, what I guess more specifically does that upside look like?

So, um you know, we have a uh target for the end of the year.

Our base case is 5400.

So as you can see, we're, we're well ahead of that uh right now and that incorporates a soft landing scenario.

We do have a goldilocks scenario upside case, which is 5700.

Under this scenario, we would have to see uh not only uh you know, the US avoiding recession but really maintaining kind of this above trend GDP growth that we saw in the first half of the year.

Um Remember second quarter GDP came in very strong consensus is all expecting a slowdown in the second half of the year.

But if we don't see that slow down, if we see GDP growth continue to grow at a healthy rate, we could see corporate earnings actually beating expectations for, for the second half of the year.

So for this 5700, for this upside, we really need to see earnings growth coming in better than expected in the second half.

Um This isn't really far reaching the second quarter.

We saw earnings growing at a 12% pace.

So it was actually above estimates, we saw about 80% of the companies beating on eps.

Um But to get to that 5700, that's kind of the the scenario we we need to see.

Um So that's why, you know, under a base case scenario, we're, we're recommending kind of the sector rotation into these other sectors where we're seeing kind of this earnings growth pick up compared to what we saw um earlier in the year.

Yeah, so the Niall there is, I guess, are you a little bit more confident that we are going to get that goldilocks scenario, that 5700 scenario, given all the factors that you just laid out?

Well, I think one thing that, that we've noticed that uh really gives us kind of uh uh more optimism is what we're hearing from companies, you know, at the end of the day, you know, we're buying earnings growth, but we look in terms of company commentary.

So we, we look at what companies are saying on their quarterly calls and sentiment is actually improved.

Guidance is actually improved.

So this is off of second quarter earnings.

And even though we've seen this uh improved guidance sentiment in terms of companies, you're not seeing analysts revising higher estimates.

So analysts are still waiting uh until we get more data until maybe third quarter results really to, to move earnings higher for for 2024.

So I think that gives us a AAA little bit of um you know, positive news in terms of what we can see in terms of corporate earnings in the second half of the year.

You know, a a at the end of the day, it's, it's corporate earnings, but we do have, you know, the fed, we do have elections, we do have other things that we think are going to bring a lot of volatility uh over the next couple couple of months.

All right, Nicole, thanks so much for joining us.

We really appreciate it.

Thank you coming up.

We're going to dive into the potential catalyst driving that, that decision this week, that all important, that decision.

And we also have a programming note, join us as markets editor, Jerry sits down with a strategist to decode the day market moves from the word of the day to who were better.

This is Yahoo Finance in its best form.

Stocks and translation airs every Tuesday and 30 at 8:30 a.m. Eastern time and you don't want to miss it.

This is a critical week for world central banks.

A slew of reserve banks set to release rate decisions this week to discuss what moves we might see.

We want to bring in Greg Daco.

He's EY, chief economist Greg.

It's great to have you here.

So let's talk about what the, the decisions that we, that we expected to get, not only here from the FED, but also the Bank of England.

When you take a look at Bank of Japan, ultimately, what that would signal then about the health of the global economy.

Yeah, it's a busy week for central banks for sure.

Uh We have the FED, we have the Bank of England.

We have the Bank of Japan.

Last week, we had the, the European Central Bank easing monetary policy.

I think this week we're going to see the fed ease monetary policy.

The key question of course is 25 basis points or 50 basis points.

We are likely to have the Bank of England on hold and we will have the Bank of Japan likely signaling or tightening monetary policy.

So diverging directions there, I think broadly speaking, in terms of the global economy, what we're seeing is an environment where the global economy is doing relatively OK.

But we are seeing signs of slowdown in the US, which has been the main of global economic activity.

The outperformer in 2023 the outperformer in early 2024 while Europe the UK are struggling in terms of growth momentum.

So let's talk about the US then because I know that you are anticipating 25 basis points this week.

Do you think that that opens them up to a 50 basis point cut the next time that they meet?

Is that one of the drivers behind your call?

I think the key question right now is where they will end up over the course of the next few months.

There's a lot of debate as to whether they go 25 or basis points.

Our call last week was 25 basis points.

We're not going to change that so close to the meeting.

But there were a couple of recent articles in the Wall Street Journal and the Financial Times that raised the uncertainty as to the potential for 50 basis points.

We continue to think that the FED is extremely data point dependent and that gradualism is likely to be the favorite approach for a lot of policymakers.

But Fed Chair Powell has shown openness to front loading rate cuts.

And if he manages to convince the rest of policy that a faster start to the easing cycle is necessary and useful for the economy, then that will be the trajectory.

Is that a strategy that makes sense at this point?

I think so, I think front loading makes sense because the fed is in our opinion, behind the curve.

I've been saying for a while now that the fed should have started easing monetary policy back in June and July perhaps.

But now we're in September and we're late in the game.

So gray, then what is the risk?

I guess if you could outline it may be a bit more plainly here.

If the market only goes 25 what does that, then risk look like here for the economy down the line?

If the FED is in fact late to act, that's a great question because a lot of people are saying, well, 25 basis points doesn't really matter.

And it's true if you ease monetary policy by 25 basis points, it does little to nothing in terms of consumer rates, auto loan rates, mortgage rates, very little.

But the risks are asymmetric.

If the FED does not ease monetary policy by as much as market are anticipating, then you'll actually see a repricing of rates and you're going to see upward movement in terms of rates and that could damage consumer spending activity, housing activity, business investment.

That is the real risk right now.

And that is why the fed's extreme data point.

Dependency is a risk for the economy.

It breeds volatility and it leads to the sudden repricing in market that are deterring economic activity.

That's the real risk right now is that the FED does not do what the markets are anticipating and that's a lack of communication and a lack of robust framework on the part of the fed that is leading to this.

So what are you hoping to hear this week?

That would be very clear communication to you outside of we're no longer data point dependent.

And here is a strong central thesis for us which is of course not going to happen.

What would you hope to hear?

I want to see two things I want to see first that we have a robust forward looking framework, not a data point dependent or a data dependent framework that is backward looking.

We're at a point where the FED needs to look ahead to the potential risks for the US economy.

We have an economy that is still growing at a decent pace but is undeniable, slowing labor market momentum, income growth.

They're both key indicators that are pointing to a slowdown in economic activity.

That is what the FED needs to focus on.

So a forward looking framework and two much better communication as to the direction of travel, we're going to see a lot of confusion around the the FC meeting because there will be a decision 25 basis points or 50 basis points.

But there's also going to be communication around the trajectory of the fed with a dot plot showing either five basis points of easing before you 100 basis points.

How do you clarify the direction of travel, the journey to a neutral monetary policy?

You know, Greg more specifically, I guess when, when it comes to the labor market, some of the weakness that we're seeing here, obviously, there's arguing, there's arguments happening on both sides of it saying that it's actually not that bad when you take into account labor supply and yada, yada yada, the list goes on.

I'm curious what you, what your assessment is right now of the jobs market and maybe whether or not the fact that we haven't seen these mass layoffs, which obviously has uh typically happened uh prior or during a recession, maybe what that signals about the strength and underlying strength of the economy.

Maybe why we shouldn't be too worried?

I don't think we should panic, right?

Because what we're seeing is a gradual, slow down in the labor market.

And at ey, we speak with a lot of CEO S CFO S that are telling us the following, they're telling us that the labor market conditions are quite expensive but that the value of talent is also much greater.

So they're not proceeding with massive layoffs across the board across sectors.

What instead we're seeing is a very strategic approach, limiting hiring to the needs that you have and ensuring that you maintain the right workforce.

Why to drive stronger productivity growth?

Because longer tenured employees are better trained and tend to be much more efficient in their job.

And that I think is why we're seeing stronger productivity growth, which is the key element that very few people are talking about in the US economy, but productivity growth is currently running at two point 7% on a year over year basis.

That's why inflationary pressures are no more.

And that's why we're seeing still a strong rebound on the supply side of the economy.

So many things to keep in mind as we head into that meeting this week, Greg, I know we'll all be anxiously setting our alarms on Wednesday morning.

So we'll have you on speed dial, Greg.

Thank you so much.

I really appreciate you joining us in person as well.

All right.

Well, as we've been discussing this week's fed meeting, it's also gonna give us an updated dot plot which spells future interest rate expectations.

Yahoo Finances, Alexander Canal is here with us to break down the current do plot and what we can expect.

Hey, I, along with that critical interest rate decision on Wednesday, the fed will also be releasing updates to its quarterly summary of economic projections, which includes what F MC committee members expect when it comes to future economic indicators like unemployment GDP inflation and of course interest rates and this is known as the do so to put it simply, the top part is a chart that tracks each one of the 19 fed officials projections for the federal funds rate.

You can see a collection of dots for 2024 2025 and 2026.

As long as something labeled longer run.

And essentially this data tells us where that officials think the fed funds rate will be heading in the future.

It's released four times a year, usually at the end of each quarter and each dot represents a specific anonymous official.

Now, if we in for 2024 only and remember this stop plot was from the month of June, you'll see the majority of fed officials saw the fed funds rate peaking at 5.1% that suggests just 125 basis point cut to come this year.

Now, clearly a lot has changed since that time with certain areas of inflation still sticky while the job market continues to be an area of concern here, markets, they're currently pricing in about 100 basis points worth of cuts through the end of the year.

So Wednesday's top plot will show investors whether or not central bank leaders agree.

Now, if we take a look at next year, the majority of officials see that that funds are hit 4.1% suggesting for additional rate cuts to come in 2025 that's up from the prior forecast of three and again, it's likely will see those 2025 projections updated as well.

So overall, it's important to remember that this is just a guide of where that officials think interest rates should go.

That doesn't necessarily mean that's where interest rates will go.

But it is an important tool we think about transparency from the Fed.

Therefore, no matter what happens on Wednesday, whether we see a 25 basis point cut or 50 basis point cut, all eyes are going to be on the stop plot.

Yeah, certainly.

And, and, and that's what we've been hearing from strategist and economists.

Right.

So much of it is about the projections and what we are expecting to see going forward and ultimately, then what that thing is, will be interesting if we do get any sort of disagreements that are out by the pot always adds a little bit of drama.

We love, we love the drama, we love the drama.

Who doesn't?

All right, Ali Banks.

Keep right here on Yahoo fighters.

We got much more coming up just about 51 minutes into the trading day.

Do you look at the major averages?

We aren't trending trading too far from the flat line, although we are seeing some losses continuing here in the NASDAQ.

You got big tech under pressure ahead of that fed decision on Wednesday.

A dow and S and P though holding on to slight gains, we'll be right back.

Let's get to some of today's trending tickers and you can scan this QR code on your screen to track the best and worst performing stocks of the session with Yahoo Finance is trending tickers page.

Let's kick it off with Dish Parent Echo star jumping after AT&T after a joint venture rather uh with AT&T a partner TV G reported to be in talks to combine their direct TV service with dish and guys apologies for mispronunciation there.

So let me reread this for you here so that I can make sure that I get it right.

We have dish and echo star.

Echo Star Rallying as dish direct TV.

Is said to be in merger talks after an AT&T and joint venture partner, Deep TPG were reported to be in talks to combine their direct TV service with dish.

And this also by the way comes after some big news for Direct TV, reaching a deal to air some those NFL games.

This was a very hot topic when I was at the Goldman Sachs conference last week because a lot of folks in their hotel rooms could not watch the NFL game.

So a slew of news items coming in for uh Direct TV here.

But interesting to see the degree of this news uh move for Echo Star jumping over 7% on news of this potential joint venture.

You, it looks like and you did a great job because there's a lot of names, a lot of letters that, that this is t to go through here when you take a look at the headlines.

But R BC in the quick reaction saying that this potential Dish and Direct TV merger is quote positive for both AT&T and Eco Star.

So you might be asking why they went on to say that cost synergy opportunities could be accretive to AT&T cash flow.

While for eco Star star side of things, the transaction could bring a cash injunction required to advance its five G deployment before the June 2025 FC.

See deadline, we know that's critical there for their business going down.

What add a boost there?

Uh When you talk about some of that optimism that's already baked in.

So again, they're looking at this as a positive catalyst for both AT&T and Echo Star.

And again, just to recap the news right there, Echo Star, Echo Star shares are moving to the upside here hitting the highest level actually that we've seen since January of 2022.

And also AT&T was also moving to the upside as well as our home builders Lenar will be releasing its Q two earnings after the Bell on Thursday, which should give a bit more insight into some of the headwinds facing the housing market over the last several months, a couple of years shares have been faring.

Well as of late on expectations at lower benchmark rates beginning with a potential cut on Wednesday could help reignite some home buying momentum.

We know home builders were almost the only game in town when you talk about the fact that uh supply has been so low, existing homeowners locked into their homes.

Therefore, home buyers that can still afford and are in the market for a new home.

They were almost left with no other decision than home builders.

But as we know, higher rates have um hamstrung that sector just a bit, they have faced a higher cost across the board when it comes to some of those input costs.

So that have put a bit of a limit on shares there to the upside.

So again, some potential positives here on the heels of that rate cut that we are expecting on Wednesday, that could offer a bigger boost, not only to home builders but really across the housing industry.

Absolutely.

And this already comes as we are seeing some potential for revenue growth amongst these names and then you add a rate cut on top of it, that could be an even bigger catalyst for them.

When are for example, expecting revenue growth of over 5%.

Interesting from our research, citing that this company's strong balance sheet is also a potential hedge against any further deterioration that could occur.

Given some of the constraints we have seen in the broader housing market that the artist research saying that Lard has the financial strength to quickly buy new building lots to meet demand.

So in other words, they've got the capital on hand to kind of pivot regardless of where the housing market is headed.

Interesting that we will be getting these earnings too.

After toll brothers earnings came out raising their full year profit guidance, they do focus on more luxury residences but still could potentially be a positive sign as we head into those one, our earnings today.

All right, let's take a look now at Tesla announcing this weekend that they've manufactured their 100,000,046 80 battery cell.

They previously announced their 50 million back in early June, the company has been using the battery to ramp up its cyber truck production.

Lately.

There are approximately 1300 of these batteries in one cyber truck which would amount to a production of nearly 400 a day since June.

So a lot of numbers there, the point here be that Tesla has been able to ramp up production of these batteries.

And when a post went out on X about these batteries, a humanoid robot was seen in the photo that is to me what feels like the most important factor for this story because it's an indication that Tesla has been able to utilize that humanoid robot to build something that is really significant to their bottom line.

We just talked about how many of these batteries go into the cyber truck if they are able to kind of create these batteries while decreasing the amount of capital they need to spend on labor.

That could certainly be a positive for their balance sheet.

Yeah, that certainly is a really good point.

And it's also one that Deutsche Bank's uh analyst Sarah Edison, you brought up in a recent note to talk about the fact that he believes Tesla is becoming a leader in A I went on to say exactly what you were just saying just about the bottom line impact and some of the cost savings there that this type of technology could potentially provide Tesla.

And more specifically, he rate Tesla stock with a buy with a 295 price target, the robot opportunity.

That's a real crux of this account for $22 of that target.

So again, significant there when you talk about potential further upside and what this could ultimately mean for Tesla here in the longer run.

So again, Tesla shares have been on a bit of a run.

Actually, I believe today going for the six trading day to the upside in a row.

So we will see whether or not some of that momentum continues.

But again, this milestone, if you want to call it, that certainly it seems to be energizing investors just a bit.

And I think a lot of that has to do with the A I technology capabilities that maybe this is further outlining.

All right, let's take a look at Apple under pressure this morning after a closely followed analyst from TF International Securities warned that demand for the firm's new iphone 16 Pro model has been lower than expected.

Preorder sales have tallied an estimated 37 million units.

Again, this is a bit of a disappointment as a result, you're looking at Apple shares, they have been off just over 3% earlier trading now off just about 2.7%.

And of course, maybe not a huge surprise.

Let me take a look at the stock reaction.

Maybe this wasn't necessarily baked in.

But based on our conversation with Needham analyst, Laura Martin last week, she poured, poured cold water a bit on this announcement for the iphone 16 saying that she doesn't expect this to really ignite a lot of excitement surrounding the iphone this cycle.

She was saying a lot of the mentions of next year are upcoming.

It's gonna keep some people on the sidelines as they wait for the next announcement and next year.

But again, a bit of a disappointment here when it comes to this analysts warning of weaker iphone 16 demand and that's being in the share price here this morning.

It absolutely is.

And it's interesting because the analyst behind this call is kind of known within the sector for being particularly kind of ahead of the curve when it comes to the iphone sales numbers based in China in Hong Kong rather specifically.

But it's interesting to think about what we're hearing from other folks on the street.

For example, we know from Bloomberg Intelligence analyst and Bank of America's WZ man whose friend of the show comes on free talking about how it might just be a touch too early, accurately gauge iphone 16 demand.

So even though we do have this analyst who again is renowned for specifically suing out demand for the iphone.

Other folks on the street saying perhaps it might just be a little bit too early to tell when regards to the iphone deliveries.

All right, we're gonna have all of your markets action ahead right here on Yahoo Finance.

So stay tuned for more.

You're watching Catalysts back in court today for a key hearing the Chinese social media company seeking to block a law that could ban the app in the US.

If the ban were to go into effect, it could impact more than just the users potentially benefiting other social media names and hitting advertisers here to talk about this and more.

We want to bring in Rachel tip that she is the CEO of Mac and that is an Ecommerce Analytics platform.

We also want to bring in Roj Kulkarni, managing director of Roth capital partners.

It's great to have both of you, Ro Let me start with you.

Uh I guess for investors out there, they're trying to figure out the odds that tiktok prevails in the DC circuit.

And then ultimately, what that would mean for the broader sector?

What's your early reading on that?

I think the odds of disruption in tiktok again, whether it gets banned, whether it gets sold or this is a prolonged kind of path of pain for Tik Tok.

The odds of either of those three things are rising in my opinion, the way I would portray that is you look at uh Snapchat stock or you look at uh Facebook stock, there is an implied probability there that tiktok disruption is more likely than not in the next four months.

And uh I feel uh that could manifest into either a complete sale, complete ban or somewhere in between, which could still mean that eyeballs and money move away from tiktok and Rachel.

Give us your perspective because on your platform, Nick Mac, I know that you have a lot of insight into uh ecommerce trends and the degree to which a lot of the huge tickers that we talk about all the time here at Yahoo finance could potentially be negatively impacted if there was a disruption to tiktok.

What are you seeing in the data on your end about the potential impact to some of these e commerce uh big box retailers?

Yeah.

So our data actually indicates the opposite.

We've seen a 60% year over year growth in tiktok traffic on any given day at Mic Mac tiktok is our second most traffic channel meta being.

Number one brands love tiktok.

It has the power of television in terms of its ability to capture mind share with an algorithm that supercharges conversion that acts a lot like Amazon Tik Tok has become a household name in advertising and brands don't be, don't seem to be scared about a ban at all, they continue to invest.

So Rachel, if brands are continuing to invest, that are kind of the bigger box brands here.

Do you have any information about maybe some of these smaller mid size businesses and how this could potentially impact their bottom lines?

I think about the degree to which I at least see a lot of those smaller mid size retailers on my for you page and how they could be impacted moving forward.

Yeah, absolutely.

If a ban were to occur, the brands that would be most impacted are the small medium businesses.

Why?

Because tiktok is one of the last places on the internet where organic content can rain in all the other platforms.

It's a play to it's a pay to play environment.

And so if you're an up and coming brand or retailer Tik Tok is a place where you can get traction with just your blood, sweat and tears.

And so if you look at that opportunity, married with tiktok shops, which is really becoming one of the fastest growing marketplaces worldwide and including the US, it would be a real detriment to the small medium businesses.

If tiktok were to go away, Rohit, how much of this has already been priced into some of the competitors when you take a look at Snapchat and Meta, going back to your previous comment there.

And and then if not, I guess in the long term, how big of a catalyst do you then see this being to some of these names?

I think it is still very early days.

I wouldn't say it is priced in anywhere close to the levels that there is clear certainty as to what the future of future holds for tiktok.

I think all, all I would say is it's rising in a way that people are increasingly focused that this is a bipartisan issue.

There is a political will and there is something to something for either of the parties to get something done in the first month in office no matter who wins in November.

So that, that's one part of thinking that Wall Street is having right now.

And the second is uh how that unfolds.

It is going to be just a long process.

It may not happen in January.

It could just be drawn out for a very long time and the longer the period, the more it benefits for some a large company like Facebook where there would be just a slow bleed away from people.

Uh investing in tiktok.

We have already heard some, some sellers on Amazon who are these exact small businesses who are trying to create content on Tik Tok because Facebook was getting too expensive.

So those people who are right now trying to cut costs, they would be the first people to slowly go away from tiktok and go into existing channels.

So that's, that's how I think it would unfold.

It won't be a one single turn off the tap and that's uh the next day everything moves over to Instagram and Snapchat, but the slow bleed helps Facebook a lot more.

And then Snapchat, those two platforms would be the most to own.

And um and one more thing I would point out is perhaps like even 10% move to Snapchat help Snapchat by almost more than 25% of the revenue.

So that whereas if 50% of uh tiktok moves to Facebook, it is just 3% of the revenue.

So the the asymmetric benefit to a smaller company like Snapchat would be much, much higher than uh than a lot, a lot of proportion going to Facebook, you know, Rohit, I'm, I'm curious as an analyst, how are you factoring in the election?

The uncertainty surrounding that ultimately, the impact that is going to have on this case?

Are you factoring that in to your estimates?

And I guess how, so uh how to factor that in uh the only way we would factor that in is through duration?

I think uh duration is uh is going to be longer term than having something happen in the first half of next year.

We'll see indications of what, what the next step could be in January or February.

And then I think uh both uh both sides will probably play the longer game and longer it starts to linger, as I said, helps us companies like Facebook like Snapchat.

Yeah.

Ro what strikes me is that it's certainly popular as a bipartisan issue, but I don't know how popular this is amongst voters and Rachel.

I wonder if you can give us some insight into that because you see the degree of traffic that is being driven on Tik Tok.

Uh What does that tell you about consumer interest?

One might even say obsession with this social media platform.

Yeah, Tik Tok would never come out and say this.

But I think we all know this as users, Tik Tok is addicting.

It keeps you in the app.

It has the greatest time spent in terms of social platforms.

It now layers in conversion with tiktok shops and Pew research recently came out with a study where users of tiktok, they don't think a ban is gonna happen and they don't seem to care either in terms of what platforms are going to benefit uh from an advertising standpoint in an election year.

Brands really care a lot about brand safety.

So we actually don't think it's like meta or snap that benefit, but really it's opportunities like Pinterest where you can be much more in control because it's not a conversational platform.

So there's a lot of different ways to slice and dice who's going to gain an opportunity against the backdrop of a tiktok ban and an election year.

Yeah.

Feel free to chime in.

I'm hearing the sounds of agreement over the over the speaker here.

Yeah, absolutely.

I think I agree.

Uh I agree with you uh Rachel in terms of uh what, uh, what brands would think, uh, when it comes to, um, brand safety and, uh, all the noise and controversy and uh, censorship that we are hearing from or coming out of Facebook.

Uh, but having said that, I think, uh, uh, the engagement and eyeballs that lie with Instagram are something that you cannot, uh, question.

It's almost like, um, nobody's gonna get fired to hire IBM in the eighties and nineties.

It's, it's almost a condition of that where um if you're a small brand or if you're an up and coming growth agency, um if you have some money lying under your cushion because tiktok is probably going to go away.

What would you do?

Would you experiment that with a very tiny platform like Pinterest because of the safety that they have perceived or let's just throw that money in something that's, that works and perhaps this will work as well.

So I think, I think that's where most of our conversations with agencies can land into where let's go to the safest be out there.

I won't get fired in six months.

Maybe Tik Tok stays around and we can revert and see what happens at that point.

So that, that's how I feel things could unfold.

And eventually those roads lead to a larger company like a Facebook.

Maybe even Amazon.

If there is social commerce that is uh starting to emerge at a, in a more constructive manner there.

All right, we're gonna have to leave it there.

But uh sounds like the audience of consumer is gonna keep using the app in the meantime, regardless.

Thank you both so much for joining us, Rachel Tip, Mick Max Ceo, and we also had Ro Rohe Karney managing director at Roth Capital Partners.

Thank you.

Well, big banks continue to issue warnings on slowing growth in China City and Goldman Sachs both lowering their full year projections for economic growth in Beijing to 4.7% after the country's industrial output expanded at its slowest pace in five months.

China's retail sales also decelerating in the month of August.

And the reason we talk about slowing growth in China beyond the, you know, global economic impact is because this impacts a lot of the tickers that we talk about all the time here at Yahoo Finance, certainly some of the luxury names that are getting a majority of their revenue from China, but also some of the other retailers that we talk about a lot, think about Nike Lululemon, some of these names that cite China growth as a key potential catalyst for their earnings growth, moving forward, Citigroup.

And uh uh Goldman Sachs here saying though that that growth, they just don't really see a catalyst, it moving forward.

And this comes after years of the Chinese consumers struggling to rebound from the pandemic.

So it's interesting to see them saying, yeah, we actually don't really see how they're going to get out of this.

Yeah.

And I think this latest data kind of reinforces the negative landscape that we've been talking about with China.

The fact that we have been waiting for this recovery, it's taken much, much, much longer to see a new sort of substantial improvement.

This follows a string of misses when you take a look at their most recent data.

And then of course, ultimately, what this is doing is the pressure is starting to mount here for the central bank to ramp up stimulus in order to hit that 5% growth target.

When you take a look at what the banks are expecting right now, it is interesting to me that Goldman was raising some questions within this.

But they did though maintain their 2025 GDP growth forecast for China at 4.3%.

That's compared to Citi, which actually trended its 2025 year and forecast for China's GDP growth to 4.2%.

That was down from 4.5% due to exactly what you were saying there, Madie, the lack of major catalyst.

So again, going into the second half of it in the second half of the year and then looking ahead to 2025 really just reinforcing that negative landscape, the downward slope that we have seen for China's economy and lots of questions about what it's ultimately going to take in order to see substantial growth or return to growth there uh more structured or more, I guess uh consistent growth within China.

That is a big question.

And ultimately the impact that that has not only for uh Chinese companies in the Chinese economy, but clearly a real risk and concern for global investors in the global economy as well.

Certainly.

And this comes by the way, after the Chinese government has been pouring hundreds of billion dollars into the economy to try and turn things around to the tune of about $700 billion in, in us.

D so certainly doing everything they can to turn the economy around, but we're not really seeing it play out just yet.

All right, we're going to have all of your markets action ahead right here on Yahoo Finance.

So stay tuned for more.

You're watching Catalysts.

We are less than two months away from the presidential election and we wanna dig into how you should consider playing your portfolio for either a Trump or Harris administration for more.

We welcome it.

We welcome in Scott and Men of Gen wealth advisors and host of the Get Ready For the Future Show, Scott.

Thanks for being here.

So talk to me about uh what the single biggest takeaway is for you when it comes to the question of how much markets really care about the election.

What do you think?

Yeah.

Well, uh thanks for having me.

It's good to be on with you.

And I think the short answer is, they don't really care about who is in office.

I know that may be shocking to hear for uh investors.

And we get that question in client meeting rooms very frequently.

But the real truth is the markets and the economy have performed well in democratic administrations and the markets and the economy have performed really well in Republican administrations.

So to get caught up in an ideological driven decision from an investment perspective is really a fool's errand.

And that's, that's really the thing that we have to express to our clients in meeting rooms on an ongoing basis.

You know, I watch the um uh debate last week and I was really struck by the comments on social media afterward and some of them from people that I knew on my own social media pages and I knew which way they leaned ideological, ideologically and to a person as you might expect, there were people that I know Lean, right, think that Donald Trump won that debate and the people that I know that Lean left thought that Kamala Harris won that debate.

And the reality is I think we see everything through our ideological lenses and we get caught up in thinking that if our person is not in office, that the economy is bad that the markets are gonna go south.

And that's just not really the case.

There's a, there's a great uh chart out from JP Morgan guy to the markets that shows the last four presidential administrations and it shows the percentage of Republicans who thought the economy was good was off the charts when their person was in office.

And the percentage of Democrats that thought the economy was good was down when their person was not.

And it flip flop every time we had a party uh regime change and the reality is GDP growth took place through all for those administrations.

So then Scott, what should investors, should investors be adjusting their portfolios at all?

Is this something that you then just, just given the fact that maybe it doesn't ultimately matter overall, just given the index returns um post election.

But what about who is in office?

Because it does affect some individual trades, individual sectors depending on policy.

Yeah, certainly.

And that's a good point.

I think uh who the president is can impact the economy, they can't control it.

You know, I think that's, that's the difference here.

Policy does make a difference and when you look at what is possibly going to take place based on who is in office.

Those are the places you could look from an equity perspective.

But I also think the overall uh economic environment matters more.

And really what we're talking to clients about is we are now moving into a likely uh cycle of the fed, dropping interest rates, cutting the interest rate.

So really the the macroeconomic view here for us is is that we're in a very good spot for bond portfolios moving forward.

So yeah, there's gonna be uh and we do talk about volatility too right around the election.

There's gonna be soil around the election, maybe even a little post election because the market may not care who wins, but they do want to know who it's going to be.

The market likes certainty and right now it is a 5050 toss up on who's going to win.

So yeah, it's gonna be volatile around the election and then moving forward uh policy decisions by whoever wins certainly matters um for an equity perspective.

But I think it's a smaller uh cause for concern if you will, I think we teach, we teach clients all the time that the overall equity market is a long term play, right?

We're not looking at trading in and out on a daily basis, monthly basis, yearly basis.

We are setting these things in motion for decades to reach our long term financial goals.

All right, Scott, we have to leave it there.

Scott and Min of Gen wealth, financial advisor and host of the Get Ready For The Future Show.

Thanks so much for joining us here this morning on Yahoo Finance just about 90 minutes into the trading day.

Let's take a look at how things are shaping up.

We weren't drifting too far from the flat line.

Although tech under pressure here today, you can see that that is still the case accelerating some of those earlier losses.

You now got the NASDAQ off about nearly 1%.

You've got the Dow and the S and P actually the, and be just below the flat line now, but the dow holding on to gains off the highs of the session now.

Up just about 117.

All right.

Well, coming up right here, you've got wealth.

It is dedicated to all of your personal finance needs.

And Rochelle A ko is gonna have you for the next hour.

So stay tuned for more.