Netflix earnings, housing market, layoff concerns: Wealth!

On today's episode of Wealth! host Brad Smith breaks down key personal finance stories from the CrowdStrike (CRWD) outage to what home buyers need to know before entering the housing market.

A recent CrowdStrike update caused a global outage that impacted Microsoft Windows (MSFT) systems across multiple industries. The incident has affected or even halted operations in banking, airline operators, and even emergency services around the world. Yahoo Finance tech editor Dan Howley provides a detailed analysis of the incident, shedding light on the concerns surrounding the small group of companies that are responsible for operating internet systems globally.

Netflix (NFLX) reported its second-quarter earnings results and announced plans to discontinue its cheapest ad-free plan in the US and France. Citi managing director Jason Bazinet notes that Netflix's restructuring efforts are "complicated" as the company strives for profitability. However, he highlights that the ad-tier business has been "consistent with our expectations," with growth in sales, although it has been under-monetized.

Meanwhile, the tech sector (XLK) is continuing to see a downturn as some investors on Wall Street are rotating out into other sectors and small-cap stocks (^RUT). EquitySet CEO Tony Zipparro comments on which areas of the market will be most sensitive to rate cuts: "That's capital-intensive industries, right? Where you've got not the greatest— where they're trying to get the profitability, right? You've got a lot of debt on the books. You really have to be cautious."

Many would-be homebuyers are choosing to sit on the sidelines and instead rent for longer as housing costs remain elevated. Yahoo Finance contributor Ross Mac joins Wealth! to break down some scenarios where either buying or renting could make the most sense for you.

Chase Home Lending Head of Consumer Originations Sean Grzebin believes the housing market is getting some relief, explaining, "Now that rates have been high for some period of time, we're starting to see a little easing. I think customers are becoming more comfortable listing, and we're actually seeing inventories grow for the first time in several years."

70% of employees are bracing for potential layoffs, whether by saving money or applying to new jobs, according to a survey from MarketWatch Guides. MarketWatch Guides data journalist Matt Brannon lays out one of the biggest finds in the study:

"One of the big ones is that age gap. So we found that Baby Boomers feel more secure in their jobs. It makes sense. They've worked for decades building up their seniority. Whereas Gen Z workers, 88% are taking steps to prevent, a job loss trying to preempt it in some sort of way, layoff anxiety is a term that we asked about to find out just how concerned people are and a majority of Gen Z workers and nearly half of Millennials are anxious about being laid off. "

This post was written by Melanie Riehl

Video Transcript

Welcome to wealth everyone.

I'm Brad Smith and this is Yahoo Finance's guide to building your financial footprint.

Our community of experts will give you the resources, tools, tips and the tricks that you need to grow your money.

Hey, on today's show, Netflix is planning to phase out its cheapest ad free plan in the US.

If you're subscribed, we'll tell you the other options that you have and mortgage rates falling to the lowest level since March.

But it's not all good news for home buyers will reveal the three hidden costs that you should be prepared for when buying a home.

Plus a new report shows a majority of workers are bracing for job cuts.

We'll dig into the data with the team that published the report, all that and much more coming up throughout today's show.

But first, let's take a look at the big story today.

Global tech outages linked to crowd strike, crowd strike.

Ceo George Kurtz is a for global disruptions, telling multiple media outlets that he is deeply sorry for the impact to customers, travelers and anyone affected.

And even though the issue has been identified and fix has been deployed, businesses are still reeling from the fallout.

Emergency services have been affected.

Hospitals have had to delay procedures.

911 services have been disrupted in several states.

Global travel has even seen flight cancellations and delays, banks, retailers and other businesses.

They've also struggled with payment processing and error screens here with more on the significance of the incident.

We've got Yahoo Finances tech editor Dan Halley Dan.

You've already got a story up about this.

So we've all been monitoring that this morning here.

What are the key takeaways that people need to be keeping in mind in the aftermath of this particular outage?

Yeah.

Uh Brad, I think, uh for the, the average person, you know, you and me, uh, someone stuck at an airport right now, someone who can't access their banking, uh, information.

Um, uh people who had uh doctor's appointments or hospital appointments.

Uh, all of those be being impacted for the regular person.

It's really just kind of buckle up.

Um, there's nothing that we can do.

Um, the crowdstrike said that they deployed a fix.

Uh, but it's not like you snap your finger and that fix immediately starts, uh, getting systems up and running again.

Uh A lot of companies like to make sure that updates are compatible with their systems or uh they want to check to make sure that they work well or won't cause further damage.

And so it's, it's not as though this is going to be, uh, you know, hunky dory immediately.

Um I think the other thing to point out is look, you know, this is a natural consequence of what happens when we rely on so many uh small companies, a small number of companies rather uh to basically power the internet's backbone.

Um You know, this is crowdstrike is a major cybersecurity firm.

Um They're very well regarded, but this was an update for Windows systems.

Um And because Windows is so ubiquitous because Crowdstrike is so ubiquitous.

Uh it just kind of cratered a huge swath of the internet.

Um I mean, you know, uh just looking at Memorial Sloan Kettering Hospital, they were canceling procedures that required anesthesia 911 is in Alaska around uh Sky TV, in, in the UK, couldn't go live.

Uh different government agencies were having issues across the board um globally.

And so, you know, it just points to there's these individual points of failure that we have in these systems.

Um And everyone's aware of it.

It's not like this is, you know, new to anyone like, oh gosh, look what just happened, how could this have happened?

This is well established, everybody is well aware of it.

It's just a consequence of everybody being ok with that.

And, and so is it likely that this is an event that triggers any regulatory action?

It, it's interesting, you know, I mean, from a, you know, antitrust perspective of any or anything like that, I don't think that's, that's an issue here.

I think uh when you look at the, the cybersecurity agencies though, uh they're definitely going to look at this, um, the government, you know, o obviously there's going to be different people in Congress who are going to pipe up uh with press releases of their own saying yadda, yadda, yadda.

Uh How dare this, blah, blah, blah.

They don't really know what any of this means anyway.

So it's, it's not gonna be them, it's gonna be the, the uh agencies that deal directly with this uh that are going to really kind of probably spearhead some kind of look at uh the, the points of failure here.

Um And perhaps how companies can try to avoid something like this in the future?

I think, you know, really a again, it just comes down to how we've structured the internet at this point.

Um It's a, a small group of companies that everybody relies on.

Uh it's homogeneous where, you know, it's not just um uh one company here uses crowdstrike or another company here use a lot of companies use crowdstrike and Windows is huge.

It's the largest desktop operating system on the planet.

And so when you mix those two, so many people using crowdstrike, so many people using Windows in this particular instance, this is just what happens.

Um And so, you know, I think really what it comes down to is would regulators look at uh a, a means of preventing something like this, uh telling companies to have other forms of, of redundancies, something along those lines.

It's, it's honestly up in the air, uh whether or not something like that would happen and whether companies would comply because this is all costly stuff.

Uh And generally when it comes to cybersecurity, nobody really pays much attention to it until there's an issue.

Um And so, you know, companies, uh uh their, it budgets, they'll say, ok, you know, cybersecurity kind of low man on the tone pole kind of.

But the reality is uh it should be one of the most important.

Absolutely, Dan, thanks so much for taking the time here and continuing to monitor.

Of course, some of the aftermath of the following action, at least as of right now.

Thanks so much.

Also tracking Netflix here on the day.

Netflix kicked off big tech earnings on Thursday and one of the highlights investors took away from the second quarter is that Netflix will phase out its lowest priced ad free streaming plan in the US.

And France, the streaming giant removed that sign up option in the UK and Canada last year for more on what this means for users.

We've got Jason Bazinet who is the city managing director, Jason, great to grab some time with you here first.

Just what should people know about how important these ad plans are to the growth of Netflix and ultimately, where we can see consumers potentially still flow into other options for the streaming giant.

Well, the street right now um is grappling a bit with Netflix just because it's so darn complicated, right?

You've got the base business, you have the benefit of the password sharing crackdown and then you have the ad tier and so the street has to keep all those balls spinning and have a view on all three.

I think you correctly point out that um going forward, the ad tier is going to be a bigger part of the narrative.

And I would say on that front, um the company's um success in getting customers to sign up for the ad tier ha has been pretty consistent with our expectations.

They, they, they're probably going to get about 80 million customers globally over the next four years, which is about what we expected.

If there has been a surprise, it has been.

Um Netflix is, is under monetized.

Um the ad revenue that they're generating off those customers.

So that that's where the streets are really gonna be focused.

Can they close that monetization gap by generating more ad dollars off of those ad tier subs?

And so that comes back to pricing strategy as well?

I mean, at, at what point do you think consumers who are trying to figure out how to cut costs or how to make sure that they're at least trimming some costs but still able to take advantage of a certain streaming platform, whether it be Netflix or whether it be one of the competitors out there, how do they best identify when they're paying too much for a service?

Well, that's tough to know.

I mean, I can only tell you the metrics we look at in the, in the old linear model.

Um Traditional TV, consumers paid about a penny a minute.

Um If you looked at their monthly cable bill, which is about $100 a month.

Um If you look at Netflix's um us ar puss today, consumers are paying about half a cent a minute.

Um So at some level, you know, even if you're paying for the, the, the full price with no ads, you know, you're, you're saving a lot of money already.

Um But for an individual consumer, if they choose to spend down from say the standard plane at 1550 down to the um ad to your plane at $7 that's really just a function of, of uh you know, whether or not consumers are willing to endure those ads.

Um I, I would say that the ad load is probably half, even at maturity, it will be about half of what linear TV is.

And so we also know that Netflix is upping its spend into content.

Where do you believe that consumers should expect to see more offerings really ramped up from Netflix, especially given that they're starting to try and nibble more at live sports or live events.

I should kind of generalize it more as, but also they have some of the unscripted series that they're spending on.

Whether it's for the love is blind fans out there or for anything of the like, or some of the scripted series, where would you like to see them really prioritize some of those dollars?

Well, II, I guess there's a couple of ways to answer that.

Um, I think what, what, uh the push into live sports is really about is really about capturing, I think advertisers attention, advertisers love advertising on live sports more than they do most other content.

So that, that's why I think they probably reluctantly went down the live sports path.

In other words, it's not a coincidence that Netflix launched its ads here.

Um after saying it wouldn't for a decade plus and then very quickly followed up with uh launching live sports.

Uh those two are joined at the hip um in terms of where they should spend their money.

Um The way I sort of think about it is, is the, is for, for Netflix to, to, to distance itself further from competitors.

The North Star is not really whether it's scripted or unscripted or sports or non sports.

The North Star for Netflix is how can they crack the code on spending a dollar of content and having that content resonate globally right now, they're, they're a little bit stuck where they're spending money um, to gain consumers and, and viewership in a particular country.

But most of those shows are not traveling around the world and there's good reasons for that.

There's just cultural differences in each one of the countries that the Netflix competes in.

It's a, it's an issue that every traditional media company has faced.

Jason.

Great to have you on here with us today and thanks so much for uh of course, always we know keeping Tabs on Netflix, but coming on to discuss it with us, appreciate it.

Happy to do it.

Jason Bazinet was a managing director over at city.

Well, investors are looking to the tech sector for signs of life this morning here as tech stocks are extending some losses after the NASDAQ composite logged its worst day in the last two years.

This week, chip stocks like NVIDIA, TS MC and A SML were hammered amid a rotation from tech leaders into less prominent parts of the market.

So with a bit of a sell off on the top of minds of investors, how should you play into the sector here with me?

Now, we've got Tony Zarro who is the equity set.

CEO Great to have you here in studio back with us.

Absolutely.

All right.

So let's dive into this.

I mean, what do you make of some of the rotation or profit taking that we're seeing this week?

Is it just trimming of positions and reallocating elsewhere?

And if so where I think what you're seeing with the volatility, right?

The the semis and what's been working going down.

I think it's been long overdue uh as we know, momentum kind of leads the market.

And so really the narrative should be where you think we are in the economy.

Uh I think we might be closer to uh early to late stage peak, right?

Not necessarily going into a huge contraction.

Um but with a little bit of slow down, if you are of the same mind, that's where, then you definitely trim down on some of the more discretionary capital intensive industries and technology such as the semis, right?

The the ones that have really gone up leaps and bounds and you get a little bit more defensive uh in terms of technology industries to play and, and thinking through where we are in the economy and using that as perhaps the, the North Star or one of the guiding principles here, then you'd also have to think about what areas of the market are most impacted or most sensitive to the rate environment.

What are those for you?

Absolutely.

And that's capital intensive industries, right?

Where you've got not the greatest where they're trying to get the profitability, right?

You've got a lot of debt on the books.

You really have to be cautious, not saying that they can't continue to grow, right?

Because the the kind of antithesis of that is we're in the middle of a multi year expansion boom and we're just taking a little pause here.

Um But you're exactly right in, you want to look for stickiness, enterprise spending.

I mean, uh not maybe on a day like today for something like crowd strike.

Uh but cyber security, right is another one.

So health care tech, uh information tech and getting back to uh software application, infrastructure, the things that will be stickier or money will continue to be put into an infrastructure or health care.

We haven't gotten into the teeth of big tech earnings yet, but as we're really anticipating the next few weeks and the results that are gonna be coming out, what do you believe is going to be the barometer for this earnings season?

I think it's going to be how good the growth outlook is and if it falls and I, I can't put my finger on exactly what that expectation is, but if, even if it's growth, but it's weaker than expected guidance, I don't think it's gonna land well.

And so that's where those big tech earnings could continue to perform well.

Right.

So you've got Microsoft, you've got Adobe, you've got, um, again, those players that could be more defensive, but because they've been pumped up so much in terms of price, uh, uh, that's where I'm a little wary until that clarity comes.

And so I think it's going to be and if all of a sudden the guidance is bad, right, it, it signals a decline.

I think there's gonna be a kind, a lot of blood in the streets in those names.

Just lastly, NVIDIA has continue to be quarter after quarter, one of the companies that can either make or break an earnings season.

And so I, I wanna get both sides of that.

What is a company that could make this earnings season?

What's a company that could break this earnings season?

Uh, NVIDIA?

Uh, absolutely.

It's, and I think a lot of people are looking to that if they surprise on the growth side, right?

And it continues to be strong, it's gonna carry all those names up, uh, and the contraction or the, uh, correction you've seen here.

I, I think it's gonna continue its momentum up.

Um And so I think it's still NVIDIA, right?

I think there's a couple others, right?

If you look at the mag seven, right?

Look at Amazon, look at Microsoft, look what they're leading and guiding to.

Um, but I think there's an over sensitivity to, is it 15% growth?

Is it 10% growth?

Is it 2% decline?

What does that look like?

Absolutely.

Tony.

Great to see you back here in studio with us.

Thanks so much for taking the time.

Tony Zappa, who is the equity set?

CEO Well, are you in the market for a new home?

We break down everything that you need to know before you hit the open houses this weekend.

That's right after the break with housing costs continuing to remain high.

The question of whether rent or buy is a big decision, many Americans are facing.

So what are some factors that you should consider before beginning your housing search?

Yahoo, finance contributor, Ross Mac live here in living color with us with more.

Hey, Ross.

Hey man.

So look, I I think I like the question but I think everyone has to understand there is no clear cut answer right at the end of the day, you know, you might hear some people say, well, actually you should buy because that's an investment.

And other people say, well, if you're renting, you're actually wasting money because what are you doing?

You're just paying your landlord's mortgage.

But at the end of the day, I think you have to look at it situationally and understand where you are, right?

And so when it comes to buying, you have to understand a few things, right?

One, you wanna know that you have great financial stability, you wanna have a good job, a good stable paying job.

But also you wanna have a lot of cash in reserves because there are a lot of cost that you might not actually expect, right?

Especially when it comes to maintenance.

Who's gonna, you, you can't call your landlord when that hot water heater goes or your roof needs fixing, right?

Um or furnace goes out.

So th there's a few things and so when it's all said and done.

Obviously, you're gonna have ho a fees potentially uh PM I right.

Insurance costs.

And so when it's all said and done, when it comes to buying your mortgage is the minimum that you'll pay, there's so many other variable costs from when it comes to renting, right?

Your, your rent is actually the max you'll pay.

And so when it comes to kind of the science, right?

I think we talk about budgeting from a 50 30 20 standpoint when it comes to your mortgage, I want you to look at this as saying, you don't wanna pay no more than 28% of your monthly income when it comes to your kind of your total mortgage standpoint.

So what are some advantages and disadvantages of renting then on the other side?

Yes, some of the advantages of renting, right is flexibility, right?

The ability to say, hey, you know, maybe I wanna move somewhere in a month or in a, in a year, we'll call it a year, right?

Uh Some people could actually pay month to month, but just calling on average, you are signing a lease for about a year or so.

So one, you got flexibility, two, you also have the ability to, you know, actually live in different places and actually maybe you wanna live on the water, you, your job isn't as stable.

But I think the biggest disadvantage is you're not actually building up that equity, right?

I think as a homeowner, you have the ability to be building up equity, you have the ability to have tax advantages.

Uh So there are a few things but I think when it's all said and done in the short term, you can look and say potentially renting can be better from flexibility.

Standpoint, you don't necessarily have all your I's dotted and Ts crossed, right?

But in the long term, I think, you know, apples to apples, right?

Same neighborhood, same, you know, unit effectively buying in the long term should be better.

Ross Mack, thanks so much for joining us here in studio.

Make sure to check out financial freestyle.

It's every Monday here on Yahoo Finance with Ross Mack.

Well, mortgage rates, we're continuing to track this mortgage rates falling to the lowest level since mid March, the 30 year fixed rate falling to 6.77%.

But what other costs should home buyers be aware of here to discuss some of the hidden fees that you need to watch for.

If you're in the market, we've got Sean Brisbin who is the chase home lending head of consumer originations.

Joining us, Sean, first and foremost, I mean, a lot of people as we were talking about in our last discussion, they'll think about some of those upfront costs and one of the main upfront costs that people think a lot about is just the down payment.

But what are some of the other perhaps top three, maybe even top four expenses and fees that people should be readying their mindset for.

Well, thanks for having me first, Brad and I totally agree with Ross on some of his insight around rent, renting versus buying.

But as it relates to um, the cost of homeownership, obviously, of the down payment, you have your interest rate, which I think most customers really tend to focus on in the process and the area they spend less time on.

Frankly, are the fees that go along with not only the interest rate, but also the cost of buying the home.

So those clothing costs are disclosed actually on a government document that makes it actually pretty easy to compare as long as you shop with more than one mortgage lender.

And so with that in mind, I mean, we've continued to watch and let's put the mortgage rate 30 year back up on the screen here because that's kind of the the week over week that people are continuing to see moderate lower here and especially as we're looking at it below right now that four week average and even the 52 week average, what do you think that this will initiate in this near term as people are trying to time their entry into the home buying market and where they're throwing bids in?

Yeah, so right now, about 70% of the mortgage debt outstanding is less than 4%.

So even though rates have come down slightly.

They're still relatively high considering what most customers have dealt with the last few years.

I think what we are starting to see is some of the lock in effect, which is really customers are not willing to lift their home because they have such a low rate.

Now that rates have been high for some period of time.

We're starting to see a little easing.

I think customers are becoming more comfortable listing and we're actually seeing inventories uh grow for the first time in several years.

And so with inventories growing, does that mean that we'll see some of the bidding spread out or is this gonna be more concentrated as it's continued to be?

I mean, where because for kind of coming into these past few weeks, we had seen some of the homes that are still getting multiple bids, the period that they would be on the market was lengthening just a little bit as well.

Yeah, and honestly, we're seeing a lot of that, we're seeing price reductions for the first time in a while.

We're seeing less of those price wars on individual homes, but it is different based on where you live and, and the competitiveness of the individual um environment there.

But I think generally speaking, we're seeing prices, you know, they're still growing, but starting to grow at a slower rate, which again, I think is advantageous for future home buyers for sure.

One huge word in the home buying market, especially when you're going to get approved worthiness.

So how can people and potential homeowners, prospective homeowners improve their worthiness for that loan in order to get them into the bidding wars and, and really outlast the bidding wars for that dream house.

Well, at Chase, we really think the best thing to do is go to your bank and see your home lending advisor because from there you get a lot of expert advice for free.

They'll help guide you along the process and they'll also educate you on the things you need to know because mainly it's all about employment and reserves as Ross mentioned, um as well as your ability to maintain the mortgage payment through time.

And so all of that can be figured out by simply sitting down with a home lending advisor or really any mortgage company and talking through exactly what you need to qualify and where you stand today, you know, and just one other thing within this sub question because I saw being your uh an advocate for your own financial health and literacy.

How do, how do I show up as an advocate for self when I'm going into these conversations, whether that be with a financial institution and trying to get a loan or whether I'm going into those negotiations, I mean, so many different parts and, and some complex conversations that people, if they don't have representation that they might have to navigate themselves.

So how can they advocate for themselves?

The main thing to do really as it relates to your mortgage is to actually shop.

You know, we find, you know, studies have shown 54% of customers don't shop, the 46% that do actually get a better deal.

And so it's never good to just go to one lender.

First off.

Second off is again, find someone that you trust, find people that, you know, have bought before.

You know, again at Chase, we have home lending advisors and branches across the United States.

Happy to help anybody um at any point in time.

But really there are advocates available.

Your realtor can be very helpful as well in the process.

But I I really encourage customers mostly to represent themselves in this and take the time to shop.

It's become easier as I mentioned earlier.

There's a standardized document that allows you to compare cost rates, everything you need, including payments.

And it's just most important to not be in a hurry to not be intimidated by the process which many customers are and to actually explore your choices.

Sean Grisman, who is the Chase Home lending head of consumer originations, Sean, thanks so much for taking the time here with us today.

Thank you too, bro.

I appreciate it.

Definitely small caps rallying this week.

We explain what the stocks are and why they spiked this week.

That's right after the break.

More bad news for student loan borrowers.

A Federal Appeals court has blocked President Biden's debt relief program which is known as save, intended to lower monthly payments and calculates what you owe based on your income and family size.

Now, the decision comes after back and forth rulings last month which blocked parts of the save plan and then allowed the education department to proceed with parts of the plan here with more.

We've got Yahoo Finance's senior columnist, Rick Newman.

Ok.

So a lot of going back and forth on this, it seems to this point it was on, it was off, it was on now it's off again.

Um So this is not the final word and this is not the only, um, debt cancellation plan that Biden has.

It's a big one though.

Um, it's the save plan.

Uh, it has more than 88 million people who can qualify for it.

Um, and this is, this is one that would lower payments for people who have been paying for a while.

Um, so you get, you get credit if you've been paying for more than 10 years.

Um, and there, there's no way to just explain to people.

Here's what to do.

You have to.

Yeah, you just have to know which, which, uh, which plan you qualify for.

There's a website student aid.gov.

Every time we talk about this, I'm like, go, you're just gonna have to go and what's going on.

Um, and what the government is now doing so.

So, uh so uh this litigation is going to continue.

The, the whole question is whether because Biden did this by executive authority in 2023.

Um a, a lot of people including Biden himself have expressed doubt that the president actually has the authority to do this to cancel student loans without an act of Congress without it actually being uh written into law.

So Biden try to do it And as I, as I, I think everybody expected, um just about everything he has tried to do has been challenged in court.

So um the cancellation under the safe program, this is not final.

The the the appeals court has said we're gonna put this on hold.

So there's gonna be no debt cancellation until it works its way all the way through litigation.

So in the meanwhile, uh the education department says, well, you're gonna be in an interest free program so you may pay back the principal in the meanwhile, we're not gonna charge you interest until we see how this shakes out.

Um There are other debt relief plans.

Um So some other people are not affected by this.

You just need to know which plan you're in and follow the website to see what the latest developments are.

How much does this become one of the talking points going into November, the amount of loans that are looking to be just forgiven in entirety or at least trimmed down Biden wants it to be a talking point assuming Joe Biden is still a candidate, I mean, uh which seems increasingly unlikely.

Uh But even if he's not, I think uh this is popular among basically all Democrats, at least some degree of debt cancellation.

Um So Bi Biden's um point on this going all the way back to when he was campaigning in 2020 is you need to do this through congressional legislation.

So what the Democrats say is you need to elect a Democrat president and you need to give Democrats control of the House and the Senate.

Um And that way, maybe we can write this into legislation and then the legal challenges won't, won't be so severe.

However, as a reminder, Democrats had control of both houses of Congress for the first two years of Biden's presidency and they could not get this done.

Um It's, I if you're gonna, I mean, this is a lot of money uh when you tally it all up and if you're gonna take $100 billion and say we want to create an aid program, uh the first place to target it would not necessarily be college graduates.

I mean, there are needier people, people than college graduates if you're going to dole out federal aid.

Um So that is one of the reasons this is hard to pass even among Democrats.

Um But uh that's, that's what Biden wants people to think.

Anyway, Donald Trump for his part.

This is not something he talks about.

He doesn't like that cancellation.

Republicans in general don't.

All right, Rick, thanks so much for taking tabs on this.

Appreciate it.

Small caps have been on a tear this week up.

Nearly 2%.

As investors rotate out of the big tech names and move into small cap stocks to discuss.

We've got Yahoo Finance its very own.

Julie Hyman here with us in studio.

Hey, Julie.

Hi, Brad.

Yes, we have seen a big gain in small caps and just to back up for a second to sort of set the table on what we're talking about.

Small cap stocks generally have a market valuation of between $250 million.02 billion dollars caps.

And when you hear those mentioned in conversation, 2 to $10 billion and large caps tend to be $10 billion to $200 billion.

And up from there, of course, because we have some multi trillion dollar valuations.

Now, when we talk about the mega caps, so that's what we're talking about in general when we're talking about the small caps.

And if you look at how these have done and this is the returns from when we got the CP I report through yesterday.

This explains a little bit the timing that is as to why these stocks have done so well.

And what you're looking at here is the Russell 2000, which is small caps versus the S and P equal weight index and the S and P 500 the equal weight index just shows as if every stock had an equal weighting.

The S and P 500 is market cap weighted.

So this shows that there has been pretty broad participation but that the small caps have been the winner.

So what changed with that?

CP I report it was another report that showed inflation is moderating and raise those expectations that the Federal Reserve is going to cut rates.

Come September, why is that benefiting small caps more than the others was small caps under performed this year.

They also tend to carry more debt.

So the perception is is that if when rates start to come down, that it will be more beneficial to those companies, that's just one of the reasons why we've seen them do well.

So this is through yesterday.

We have started to see this rally though and the rotation start to roll over a little bit and that continues today.

We've got the world in 2000 down about a half a percent in today's session.

If you look at the full week here, you'll see the peak and then a little bit of a come down.

And if you look at that, in contrast with those two other indices, we were just looking at the S and P equal weight has done the same thing, but it's underperformed the small caps.

And so has the S and P 500.

In other words, the small caps have started to now come down, but it's still outperforming on the week and on the two week period, the other, uh, bigger cap stocks that we have been watching, which has been interesting.

And so is everyone on the small cap bandwagon?

I mean, how many are perhaps saying?

Yes, small caps here we go from here.

Or are there skeptics out there?

Yeah, there are definitely skeptics out there, right?

Um There are definitely skeptics out there who are not all in on this.

We talked to Edgar Denny of Yardeni research the other day and he said there's small, a small uh excuse me, short covering that is happening.

So part of this is a short squeeze which implies that it's perhaps not as sustainable.

One of the other skeptics out there is Eric Johnston over at Cantor Fitzgerald and among other things, he is looking at the profit forecast for the small cap companies as the subman over Bank of America points out about a third of the companies in that Russell 2000 index don't make money, they're unprofitable.

But looking at it another way as Johnston does, here's the profit margins on historical basis.

And so you see the trajectory is kind of downward and as he points out, this is the 10 year average profit margin, we're kind of bumping right around there.

In other words, we're not seeing above average profitability for these companies at a time when people are pouring in Johnson Johnson also points out that the valuations are relatively high, given this kind of profit profile finally, to go back to Superman and from Bank of America.

While she pointed out the weakness in some of the small caps, she's still a buyer of certain sub sectors and she talks about buying higher quality small caps.

So in other words, even for people who are looking at small caps, they're not necessarily looking at the complex as a whole, they're taking another look, but then using other filters to figure out what to buy.

All right, keeping the post on small caps for us here, Julie Hyman.

Julie, thanks so much.

We've got much more on wealth after the break.

You're watching Yahoo Finance, Americans are worried about their job security despite continued historically, low unemployment.

According to a new study from market watch, a full 70% of employees are bracing for layoffs in some way, whether that means saving money or applying for other jobs to help us dive into this study.

We welcome in Matt Brandon, who is the market watch guides, data journalist.

Great to have you here with us.

So, I mean, just take us into some of these findings.

Seven in 10 workers bracing for job cuts here.

That's right.

Thank you for having me on.

So we wanted to learn more about how people are reacting to news of potential layoffs we know that in 2023 and in 2024 there were a lot of headlines about layoffs, especially at tech companies giving people a lot of concern.

So, what we wanted to do is we decided to survey 1000 American workers, excluding those who are self employed because you can't lay yourself off to find out how worried they are about being laid off.

So we asked about job security opinions on if they're taking preparations to get ready for layoffs, financial readiness and how far they'd be willing to go to keep their job.

And as you mentioned, 70% of the people we surveyed said they're bracing for layoffs in some way, that means different things to different people.

40% of those are people who say they're saving more of their income than usual.

32% say they're actively browsing job listings and 24% say they're actually applying to new jobs right now.

Those numbers are even higher among younger workers who are especially nervous.

It makes sense.

Given that Gen Z workers would be a little more anxious.

They have less seniority and they're particularly worried about being laid off with that in mind and kind of continuing down that thread.

I'm wondering where it continues to kind of break up where there's some divergences even among generations that are actively in the workforce right now.

Yeah.

Yeah, absolutely.

There are big differences and one of the big ones is that age gap.

So we found that baby boomers feel more secure in their jobs.

It makes sense.

They've worked for decades, building up their seniority.

Whereas Gen Z workers, 88% are taking steps to prevent uh a job loss, trying to pre empt it in some sort of way.

Layoff.

Anxiety is a term that we asked about to find out, you know, just how concerned people are and a majority of gen Z workers and nearly half of millennials are anxious about being laid off.

So we've definitely found that, uh, the younger you are, the more likely you are concerned about this and that also matters because younger generations are particularly fear, fearful of A I coming to take their jobs.

That was another one of our big takeaways.

You know, it's really interesting.

I mean, for those who are concerned with A I potentially taking their jobs and then hearing that, hey, maybe there's a way that I can work with A I to be more productive and maybe even getting to a point where just give me the A I so I can be more productive and keep my job.

You know, how are you seeing people potentially reskill or upskill even in order to add on to their own job security or at least best position themselves to be more productive in their current role?

Well, one of these aspects, it's a little bit tough to get ahead of the curve.

If you're already deep into your career.

Uh, one of the things I would mention is that it's going to depend on what field you're in.

So there was an mit study that looked at what they called vision related tasks, uh, which are jobs they deemed, uh, uh, uh, a little easier to study in terms of how likely it is for A I to replace them.

And they found that jobs like retail, social services are at higher risk than roles pertaining to education and finances.

So one thing I would say is it's going to depend on your job field, how nervous you are about being laid off.

And the researcher who wrote that paper, we spoke to him who said that these things are going to start to happen as soon as companies feel they can uh upscale their A I enough to where it can replace people.

And we did recently see into it lay off about 10% of its workforce citing A I as one of the reasons there.

I, I know you have some tips as well for, for dealing with layoffs because I mean, it's never something that anyone wants to have to experience within their career.

I mean, many people, many of us do at one point or another and, and it's never easy.

But, you know, some of those tips might be very helpful for folks right now as well.

I hope it doesn't happen.

But in the event that it does.

Absolutely.

As part of this project, we talked to a lot of experts about what to do if you are, uh, fearful that you will be laid off or that you have just been laid off.

The first step.

If you're facing a layoff is just to seek support.

You don't want to get wrapped up in the financial and turmoil.

You might be feeling internally.

Uh, it's much better to just take a breath and try to talk to people you trust.

Uh, from then if you are laid off, there are resources out there for people who have recently been laid off, you can talk to the career center at maybe your alma mater or there are local American job centers which are funded by the Department of Labor which provide uh, interview training, help with people organizing their resume, that sort of thing.

I would also add once you're in that sort of position, it's important not to, uh, focus too much on the fact that you're in a state of uncertainty.

It's still important to find time to do the things you like to do.

Uh, just to try to take your heart rate down and remember that there are other things in life aside from, uh, maintaining a job.

Certainly.

And I'll add one on matt preempted.

I mean, just go to your boss and off cycle.

Just say, hey, I wanna know what I can do better.

Where do you think I can help this team more sometimes that that goes a long way too and just showing initiative.

So, Matt, thanks so much for taking the time here on the day.

Matt Brandon, who's the market watch guides, data journalist?

We appreciate it.

Thank you for having me.

Certainly, the IRS is changing rules for pulling money out of your retirement accounts early.

We discuss what you need to know right after the break.

Stick with us need a quick 1000 bucks.

The internal revenue service A K A, the IRS making it easier to take some cash from your traditional retirement account penalty free for a personal emergency to discuss what this means for your money.

We've got Bill Harris, who's the evergreen founded?

CEO Great to have you here with us first and foremost.

I mean, just take us into this update from the IRS.

This is, this is pretty significant.

Uh Yes, it is Brad.

Great to be here.

And um this is another of the steps that the IRS is taking in recent years to be a little bit more customer centric.

Um, some of the things they're doing, they're um offering some free tax software for very simple returns.

They're trying to do a better job answering the phones.

And in this case, what they're doing is allowing people an easier way to take one up to $1000 out of their um, retirement account if they need it for a personal uh emergency OK. And so with this now, I mean, what like what really prompted this was it pressure on the IRS was the IRS realizing that more people needed to be able to tap this for just emergencies.

Like, well, it's pretty common knowledge in, uh, in the economy.

Right now, there are many people who are struggling to uh, to handle emergencies, particularly because they have not much cash on hand.

And uh currently you can in an, a hardship or an emergency.

You can, uh, withdraw money from a retirement account with, uh, without paying the 10% penalty that you would normally pay as well as the tax bill that you would normally pay if you take money out.

There are exceptions today, but they require you to specify the exceptions and work directly with, uh, your employer.

This $1000 amount it's now free from an employer's, uh, certification.

Does, does everybody qualify for it or are there certain prerequisites, um, just about anybody who has a, uh, retirement account, either a 401k or an IRA can, uh, take out this money.

It can only be done once a year.

Um, not all employers actually support the plan at this time.

Uh, and you can only take up, uh, any amount that is over a minimum $1000 balance in your account.

And does it sound like there are taxes that you would have to at least consider around this type of withdrawal Yes.

Um, when you take money out of an, out of a retirement account, you a pre-tax retirement account, you owe taxes.

And so, um, you would typically, if you just withdrew the money without a hardship or emergency exemption, you would typically not only owe the taxes that you never paid originally on that amount that's been, um, that's been invested, but also a 10% penalty.

Now, in this case, if you take the $1000 out, you don't have the $10,000 sorry, the 10% penalty, but you do ultimately need to pay the tax on that $1000 if you don't pay it back within three years.

Understood.

And, and bill just lastly while we have you here, I mean, one of the major things that we're kind of trying to track right now, it's just a state of retirement savings.

I mean, if you're taking away from this 1000, of course, that's, you know, or taking out this 1000, of course, that's 1000 less that you have for later on.

But maybe that, that helps you out in the long term because you're also not hitting your, your real cash or the real kind of cash flow that you may have to deploy towards that expense.

No, it's very tempting to take the money out and that's exactly why you should work very hard not to do.

So, this is your long term money.

This is your retirement money.

This is what you're funding for the future.

And it's actually a good thing that it's hard to take money out of a retirement plan.

So, although you don't have to specify the reason, work really hard to use this only when you absolutely need it.

And by the way, the money that you, you talk about could be in a bank account.

Well, in bank accounts today you're earning just about nothing.

All of the majors, uh, Wells Fargo Chase Bank of America, you know what they pay on checking accounts and savings accounts, 0.01%.

And by the way, if, uh, in the current 5% interest rate environment, if all checking accounts, just the checking accounts paid five percent.

The American public would earn an additional $283 million each day in their checking accounts.

People lose as much money in their, in interest in their checking accounts as they are paying in interest on their credit cards.

You know, that's really interesting, especially given the amount of fees that we've started to get charged on some of the simple savings accounts right now.

Uh, that's a conversation for a different day, Bill.

Harris Evergreen founding CEO joining us today.

Bill.

Great to see you.

Thanks a lot.

Thank you, everyone.

That's it for wealth.

I'm Brad Smith.

Thank you for watching.

So you could stay tuned for market domination with Julie Hyman and Josh Lipton.

That's coming up at three pm eastern time.

You do not want to miss it.