Top Wall Street and economy experts join Madison Mills and Seana Smith to take a look at the top stories driving the market on Catalysts. As small-cap stocks...
China's central bank has introduced new stimulus measures to combat deflationary trends and boost the economy, but Charles Schwab 's chief global investment strategist Jeffrey KleintopAs roughly 45,000 workers at ports across the East and Gulf coast are set to strike next week, Michigan State University supply chain management professor Jason MillerWe've got three catalysts moving the markets this morning.
When you take a look at the market's reaction to this, clearly, the concern here for investors for the market is what ultimately this means in terms of the strength of the overall economy. And maybe this is just a continuation of that having said that we are going to get to some sound from Governor B and here's what she spoke about this morning in terms of why she preferred a 25 basis point cut.
Brian, we've seen a bit of a run up here in defensive sectors over the last couple of weeks given the fact that we do have this risk here or, or I guess maybe confidence risk of recession obviously is adding to that defense play, right? I'm just notifying John Deere right now, if you do that, we're putting a 200% tariff on everything that you want to sell into the United States.Like the one that former President Trump mentioned in that clip are playing into any sort of company level activity ahead of the election?The challenge with tariffs is not necessarily the tariff rate, it's really more the uncertainty around it.
But when you talk about that rising geopolitical risk, how much of that has been factored into the market? And as the fed continues its easing cycle, many investors are betting that small caps could go even higher.He's a Goldman Sachs Asset Management Portfolio manager, Greg.Sweeping Wall Street when it comes to some of that upside here for small caps.Yeah, I think it's, uh, you know, there's been a number of tail ends for small caps that really have been ignored over the last couple of years as we've waited for this rate, uncertainty, the economy is, is quite stable.
You know, I think that we'll probably see another, you know, kind of chance that we could get close to 50 again in one of those two meetings.It wasn't as much of a signal on the way up, you know, after a while we got used to 50.So I think they'll use it that way on the way down too.Because I do think that so many of our companies, you know, and had to really understand how to operate under much higher rates.
And if you think about, you know, the, the market's gonna be too high twos, you know, close to 3% GDP growth this quarter, I think the, I think for 2025 most of the estimates and forecasts are, you know, 2, 2.5, that's a pretty good place to invest for small caps because I think that that's, that gives you that benign tail wind that these companies can, if they, if they're in good places to be, they can, they can work pretty well to that end.
And I boot bor beyond the Western wear theme of, of Beyonce and the return of Yellowstone in November. So then Jeffrey, is it safe to say that maybe this massive rally that we did see today on the heels of this news, it's a bit of an overreaction to the upside.We know that Chinese stocks have rallied 20% in the past when hopes about a stimulus driven turnaround happened.
Uh No, no, I don't think this, I don't think this is a sign that the consumer is getting the support that the consumer needs. It sounds like it's going to take uh quite some time in order to really gain a any sort of sustainable momentum.Uh Well, I I think if you're focused purely on China, the stocks are very cheap and any kind of news like this can get them to balance.
And I guess I'm curious too to that and you mentioned kind of the macro impact of central bank easing but also then the equity specific impact on names like luxury stocks, for example, does the China deflationary story impact equities more or is it more of a macro challenge that us based consumers even should be thinking about because of the economic impact which is worse, I guess economy or...
So all of this uh backs into a picture where there could be some volatility uh in the overall economic backdrop. And that's just not true in China that creates a lot of potential for volatility when you see these dramatic moves now and increasingly dramatic moves. I also wanted to point out this led the MS C I the global stock index to its highest high of all time.We also saw the C 40 index over in France moving to the upside in France, in particular is heavily weighted towards those luxury names.You can see that on your screen right there heavily in the Green.Mh, in particular, 40% of their revenue last year came from a pack alone in 2023.
So now that we are seeing this stimulus package a play out in China, some of that optimism sweeping across the Chinese markets, but obviously spilling over into some of the uh especially the spillover effect into the luxury goods sector.And we were just talking to Jeffrey Kleintop a few moments ago and he was saying that he is actually not convinced that this is really going to be enough to turn around China's lagging economy right now.
And that's really the crux of the issue because we know that diabetes, drugs are covered and they have been, there's no rules against it, but we also know that the weight loss drugs are the ones that are less favorable and price wise, even though we've seen some moves for reduction, for example, Lily, just reducing the starter doses through Lily direct for those paying cash.
So that's sort of been the crux of what Novo has been trying to emphasize, interested in getting the insight there.Well, bullish call Sweeping Wall Street and some strategists. Barclays was one of those firms saying that capital economics had said S and P 6000 by the end of the year.It was ok. We're going to continue to have if we continue to have mega cap exceptionalism, meaning those mag seven keep rising and there continues to be this A I euphoria.I think that also caught a lot of people's eyes is maybe concerning then that would be what brings us to S and P 6000.
It's the first quarter we've seen those 490 outperforming the top 10 going back in about about over a two year period.This is a little bit of a different narrative that gets us to 6001, quite frankly, that as an investor, I believe in a little bit more and maybe I feel a little bit more comfortable with it.
I think it's more that we're heading lower because also sea, I think about why, why would the fed not cut the 100 basis points that the markets pricing right now?Perhaps the most concerning thing people would flag would be if the FED does cut more than the market currently expects because then you're probably getting signs of economic weakness.And to Greg's Point too, they went up by 75 at certain points if they go down by 75 whatever.
Um, Once it would begin, what's your base case for the longevity of the strike and just the degree to which they do kind of have bargaining power, given the degree of impact.So right now, my base case would be we would get a couple of days in and I find it difficult to believe that the Biden administration will not invoke the Taft Hartley Act and essentially have a commission for deliver a report.We would expect some slowdowns over that period.
The most affected sector that I see is the space just given the key role that auto parts play as an import.There's really no opportunity to reroute those imports. So Jason, do you think that the potential inflationary pressures from this are going to be as widespread as Chris mentioned there?Yeah, I I certainly view it as much more contained because again, you always have to look and say roughly 10% of consumer spending of all types comes from imports.So even including crude oil that obviously isn't affected because it's coming primarily from Canada.
So, you know, this is interesting because when, when you take into account how critical she was as a start witness in this uh I I in this trial here, many are are, are saying that she might be able to avoid jail time.But critics though are saying that hey, she wasn't a whistleblower.She then cooperated with authorities after the fraud was brought to light.So of course, we will closely be watching to see how this all plays out.
So we will see another story we're watching by dance announcing they will be shutting down tiktok Music at the end of November just two years after launching the music streaming service is telling users about the service originally meant to compete with Apple and Spotify, that they should transfer their playlist over to other services by the end of October.But having said that I do want to give a little bit of context here.
Another Mizzou football player reaps SEC player of the week honors, and TV details are out for MU’s next game.The drugmaker could decide to pursue a spinoff of the business if the bids aren't attractive, Bloomberg said, citing people familiar to the matter. It has also been in talks to bring Abu Dhabi Investment Authority and Singapore sovereign fund GIC Pte into the consortium, the report added.
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