SCOTUS Weakens Fed Powers & AI Leads Stock Market in H1

0:00Tuesday on NBC, Jimmy Fallon and Bozma St John host the highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best I do win! On Brand with Jimmy Fallon. Series premiere Tuesday on NBC. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, how chicken soup for the soul collapsed into a bankrupt bisque.

0:39Then, the power of government regulators just got old yeller'd by the Supreme Court after SCOTUS overturned the Chevron Doctrine. It's Monday, July 1st. Let's ride.

0:54Today is not only the first day of the second half of the year, but also a sacred day for baseball fans. It's Bobby Bonilla Day. Every July 1st, retired third baseman Bobby Bonilla receives a$1.2 million check from his former team, the New York Mets, even though he hasn't played an MLB game in over 20 years. The reason is that back in 2000, the Mets owed Bonilla$5.9 million. But instead of taking that cash up front, he worked out a contract that spreads out$30 million in guaranteed payments through annual installments from 2011 through 2035. And so July 1st has become an annual celebration of Bonilla's savvy financial planning and an opportunity to make fun of the Mets.

1:36Let's be honest. It should be a federal holiday because you got first day of the second half of the year. You have this great day to learn about financial planning. And then you also have that opportunity to make fun of the New York Mets. All the ingredients are there. Another wrinkle to the Bobby Bonilla deal that is very interesting is at the time that they made the deal, they were invested with Bernie Madoff. So they thought they had this double-digit cash cow made-off account. Didn't exactly work out the way they planned. And the only thing that this really worked out for was Bobby Bonilla.

2:08Now let's hear a word from our sponsor, Meta AI. So as many of you know, I've been training for marathons on and off for the past couple of years. But sometimes you just get stuck in a rut. Can't relate to any of this, but I'm sure there's a universal takeaway somewhere here. Sometimes training gets repetitive, okay? but almost by accident, I discovered Meta AI can help with this. I was searching for running content on Reels, but then I decided to ask Meta AI for any training wrecks. I was wondering what that Ask Meta button in the corner of my Instagram search bar was for. Yeah, I never thought to ask it for running wrecks, but I was pleasantly surprised to see it list out a few workouts I could loop into my training to help break things up.

2:45So today, I'm doing three by two miles at half marathon effort, thanks to Meta AI. I hope my meta AI realizes I am not a big runner and gives me something easier. But you can expand your world with meta AI now on Instagram, WhatsApp, Facebook, and Messenger. This episode is brought to you by State Farm. Checking off the boxes on your to-do list is a great feeling. And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you. Whether you prefer talking in person, on the phone, or using the award-winning app, It's nice knowing you have help finding coverage that best fits your needs.

3:22Like a good neighbor, State Farm is there. The Supreme Court has had a more influential summer than anyone outside of Sabrina Carpenter, and it kept its string of important rulings going with a decision that rocked the business world to its core. In a 6-3 decision, SCOTUS overturned one of the most cited precedents in American law, the Chevron Doctrine. The Chevron Doctrine is a 40-year-old decision that gives, well, gave federal agencies broad power to interpret laws within their domains. Legal confusion around factory emissions, the EPA had the authority to step in and guide a decision. Vague law in health care, the CDC was there to determine how it should be implemented.

4:01But after the ruling, the precedent is gone, which means courts are no longer required to defer to the so-called administrative state when it comes to regulating industries. That power will instead return to judges who critics argue are far less familiar with the nuances of a particular industry that they will now be asked to have the final say on. Neil, by hamstringing the administrative state, everything from net neutrality to climate change will be affected. This was a very big deal. Yeah, this is great for business interests. It's great for lawyers because any single regulation that comes down the pipeline from that alphabet soup of regulatory agencies that have really become the main policymakers in the United States right now, the EPA, the FCC, the FTC, the FDA, anything that comes down the pipeline for them is going to be challenged by industry lobbyists.

4:50and it will go to a court. And previously, for the past 40 years with Chevron deference, the court has said, okay, well, these agencies are experts in their fields. Why don't I just defer to them in terms of what regulations they want to implement now that has been completely scrapped? So you're going to see a wave of litigation targeting a ton of regulations that a lot of people say protect consumers and protect our waterways and things like that. In the short term, a lot of people are like, wait a second, What is going to happen to the 17 ,000 lower court decisions and 70 Supreme Court rulings in the past that have relied on the Chevron doctrine?

5:26Are those just all going to be tossed out the window? Chief Justice Roberts did say that they will stand. So at least in the short term, it cleared up some of those immediate legal questions. In the long term, though, this is a very big win for the conservative legal movement business groups as well, who have long just objected to Chevron, partly based on just a general hostility to what I keep calling the administrative state. but also partly on the belief that agencies should only have the power that Congress gives them. There is, we have separation of powers in our government for a reason. They always thought that potentially these agencies have just become too powerful.

6:00Their influence has creeped beyond what they were initially intended to do. And then the pushback on that is, why would we rely on a judge to make a very important decision about a very important regulation when they were just recently assigned to the case and they're looking at something like net neutrality or what the FTC has done recently with banning non-compete clauses and are just learning about this information for the first time. And they have to make a big ruling. Why would we let a judge do it? And it might back up the courts and create all of this sort of paralysis in Washington. The administrative state was the only thing that was the only sort of organizations that got anything done recently with Congress as a deadlock at gridlock.

6:39So you have burgeoning technologies like AI and crypto that require regulation, but Congress just doesn't really do it because they are stuck in the mud with all of this gridlock. But the agencies are the only things that have the power to regulate these newer technologies. So that's the pushback on that. It's like, why are we just going to get bogged down in the legal system with judges that don't really know what they're talking about? They have no technical expertise in these subjects. Many companies have begun to roll back their initiatives for diversity, equity, and inclusion, better known as DEI, but none have done so as publicly so suddenly as Tractor Supply.

7:14The company, one of the largest retailers of farming equipment and animal feed in the country, announced last week that it would abandon its inclusion initiatives following a boycott campaign from conservatives on social media. That means eliminating all jobs focused on diversity, equity and inclusion and ending sponsorships of pride festivals. In a statement, Tractor Supply said, we have heard from customers that we have disappointed them, and we have taken this feedback to heart. What was this feedback? Well, the campaign against Tractor Supply was instigated by conservative commentator Robbie Starbuck, his real name, who started taking aim at the company's DEI programs at the start of Pride Month in early June.

7:52Those complaints started to gain momentum online to the point where Tractor Supply leadership took drastic action. It seemed to feel its business was being threatened after shares fell 5 % over the month of June. Instead of investing in DEI projects, the company said it would focus on priorities it feels is more aligned with its conservative rural customer base like veteran causes and ag education. Toby, another win for the anti-DEI crowd, which has been racking up a lot of them lately. Yeah, just the sheer speed of this full-on backtrack shows how much the tide has turned even against four years ago when a lot of companies thought it was a necessity to promote and support these policies.

8:30Now, corporate America across the board is rolling back its DI efforts. And it is interesting, too, because a lot of the backlash came from the social media campaign. And I think that leaders at Tractor Supply saw what happened with Bud Light earlier this year. They saw what happened with Target earlier this year and saw, or last year, and saw just the real business impact that those campaigns, those boycott campaigns had and decided to take decisive action very quickly here. This is a major pivot because as recently as 2002, Tractor Supply earned a perfect score on the Human Rights Campaign Foundation's Best Place to Work Corporate Equality Index.

9:10They were lauded for their inclusion efforts. So this feels like a stab in the back for a lot of LGBTQ advocates, especially during Pride Month. They called it an embarrassing capitulation to the petty whims of anti-LGBTQ extremists. Another nonprofit said Tractor Supply was turning its back on their own neighbors with this short-sighted decision. So this really stings for people who thought we were making progress in DEI four years ago after those Black Lives Matter protests. Now, Tractor Supply could be an outlier too because around 70 % of companies say they plan to expand their DEI programs according to a 2023 survey from an executive recruitment firm.

9:47But other companies have made more subtle shifts where they're changing the way that they describe, the language that they use to describe these programs. A lot of it because they want to head off some of these legal challenges that are propping up, saying that it is actually discriminatory to include race and gender as factors in hiring decisions. So we are seeing subtle shifts across corporate America, but also very big 180s from companies like Tractor Supply. It really all goes back to the Supreme Court again. I know we've said Supreme Court maybe like 30 times over the past two weeks. But in 2023, there was this big decision that they struck affirmative action from college admissions process.

10:22and that didn't really have much to do with businesses, but it did create a lot of legal uncertainty for companies and it opened the door for a lot of attacks from anti-DEI conservative advocates who were now launching legal campaigns against corporations like Starbucks, Disney, and Target and companies are looking at all of their documentation and say, does this open us up to any legal liability? And that has been a major factor in the rollback of DEI programs. Congratulations, everyone. You have officially made it to the halfway mark of the year. So go ahead and bust out those orange slices, get those legs elevated, and listen as we break down how the stock market fared through H1.

10:59If you had to hand out an MVP award, it would go to AI and NVIDIA. The AI chipmaker surged 150 % and briefly became the biggest company in the world. Just to put its utterly absurd dominance into perspective, the S &P 500 gained 14.5 % in the first six months of the year. NVIDIA alone was responsible for over 30 % of that gain. One company, a third of the gains, just a dominating first half of the year. Dominating first half, the S &P 500 just went bonkers in H1. It notched 31 all-time closing highs to start the year, which was the most of any year this century except one, which is 2021. Also for AI, if you look at utility stocks, they rose 7.6%.

11:44And that has to do with all of the energy that these AI data centers consume. So people think that investors think that the sort of energy required is going to lift utility profits. But there is concern that there's too much weight. There's this this lineup is too top heavy. I mean, if you look at an equal weight version of the S &P, that makes no distinction between the size of the companies that trailed the version that is weighted by market value by 10 percentage points since the beginning of January, which is the widest underperformance in the first six months of the year ever. So that sort of highlights how just the average company gained 4.1%, but the S &P in general gained 15%.

12:24That gap is massive and shows how NVIDIA is really carrying the back on its team. Yeah, very tough. Carrying the back on its team, putting the team on its back. Let me get away with that. One index that missed out on all those AI gains, though, was the Dow. The 139-year-old grandpa of the stock market has looked increasingly out of touch with the broader market, gaining just 4 % compared to the S &P 500, 15 % gain. It makes sense when you look at the big components of the Dow. Nike, Intel, Boeing, all down more than 30 % in 2024. It's showing its age. And it could have been worse, but it dropped to Walgreens earlier this year.

12:58Walgreens is down 52 % so far in 2024, and that's the worst performer in the S &P 500. So it dodged a little bullet by getting rid of Walgreens. Let's go back to May, though. So the Dow was up 40 % from its post-pandemic low, which was in September 2022, and was up 6 % on the year. It crossed 40K. So we do just want to give a little shout out. It did cross a big round number earlier in the year. But yeah, it's just been bad. It's lagging behind the S &P 500. I mean, it really is the AI 500 now. Or it's the AI 2. Now, travel back in time with us at the beginning of the year. Investors were expecting the Fed to cut rates six times.

13:36Instead, we've gotten zero rate cuts. But the S &P 500 has chugged along just fine with a strong economy, strong earnings, and, of course, the AI boom, closing it to that record 31 new highs. No rate cuts, no problems? No rate cuts, no problems for most of the sectors, except I do want to highlight that real estate was the only S &P 500 sector with losses in 2024. The other 10 have gained. And if you look at what the impact of Fed keeping their interest rates at a 22-year high, it's really put a damper on the real estate sector, while the others have sort of cruised through with strong profits and the AI hype.

14:13Moving away from stocks for a second, commodities have had an insane first half of the year. Cocoa prices rode a roller coaster that seemed to only go up, jumping 85 % over shortage concerns. Gold also hit a record high last month, while oil is up a meager but respectable 12%. Commodities have had a pretty bannered year as well. They have. I mean, if you want to call it a commodity or security, let's look at Bitcoin. It hit a record after those ETFs were issued. But now it's just kind of hovering. And some people are saying it's getting a little boring. The share of Bitcoin traded over the weekend this year has reached an all-time low of 16%.

14:49percent so that you know you used to look at bitcoin as the ultimate volatility roller coaster asset but now it's just getting a little snoozy now it's cocoa prices are the roller coaster finally let's look ahead to h2 obviously only the person who runs the simulation knows what the market will do in the second half of the year but typically a strong first half has led to a solid showing in the back half since the 1950s when the s &p 500 climbed more than 10 percent in the first six months of the year. It rose by a median of 10 % in the second half as well, according to Bloomberg. You think we see double-digit gains again?

15:23I mean, who knows, but the big curveball here is the presidential election in November, and that could throw stocks haywire one way or another, or it could just keep it going on, keep it on, keep it on, because whether it's been a Republican administration or it's been a Democratic administration, stocks have only gone up for the past few decades. Give me one name or two names from some stocks you think are going to do well in the second half? All right, well, I'm not a financial advisor, and I don't know what I'm talking about. I'm just reading the news. One stock is Disney, because last month signed a deal with the government in Orlando to build a fifth theme park at Walt Disney World as part of this$60 billion investment plan.

16:02And really, theme parks are its main profit driver of the business. And then this weekend, Inside Out 2 of Pixar hit$1 billion at the global box office, becoming the first movie since Barbie to do that. So maybe Pixar is getting its mojo back. It's building more theme parks, which really drive its business. So maybe Disney is on the up. Maybe another, and then another stock, maybe Molson Coors. And that's only because I saw a lot of people drinking Miller High Life at the bar this weekend. So I think Miller High Life is going to become this like cult beer that will drive Molson's stock to the moon.

16:33That's called doing your own research right there. Up next, some news you might have missed from the weekend. I'm Christian McCaffrey, pro running back and Abercrombie is an official fashion partner of the NFL I'm not kidding when I say NFL by Abercrombie broke the internet last year and I think this season's lineup is even cooler and so does my wife who keeps stealing all my hoodies stay fit for the season and Abercrombie's newest arrivals shop NFL by Abercrombie in the app, online and in store

17:12When did making plans get this complicated? It's time to streamline with WhatsApp. The secure messaging app that brings the whole group together. Use polls to settle dinner plans. Send event invites and pin messages so no one forgets mom's 60th. And never miss a meme or milestone. All protected with end-to-end encryption. It's time for WhatsApp. Message privately with everyone. Learn more at whatsapp.com. Welcome back to Winners of the Weekend, the segment where Toby and I pick two things from the weekend's news that already have all their meats marinating for the 4th of July barbecue. Today, though, we have a winner and a loser of the weekend.

17:54And Toby, you lost to me in the pre-show origami contest. So why don't you start with the dud? Yeah, not to put a damper on your Mondays, but my loser from the weekend is Nike. On Friday, the sportswear giant recorded its biggest single-day drop ever, erasing roughly$28 billion from its market cap. It came after a dismal earnings report where it posted 2025 guidance that was so bad, at least six investment banks downgraded the stock soon after. Nike warned that sales in its current quarter were expected to decline by a shocking 10%, which was worse than the 3.2 % drop most had projected. And that is coming on the heels of its slowest annual sales gain in 14 years, not including the COVID-19 pandemic.

18:33Like, Neil, I'm sure lots of MBD listeners have heard us talk about Nike's struggles this year as it fends off challenges from upstart brands like On and Hoka. But it was alarming to see a company of Nike size and status just get wiped out like that. And this is all going back to one person. CEO John Dono took over on January 2020. These analysts looking at the stock are putting all of these failures squarely on him and saying management is not executing. It's missed the trend for running and it's getting lapped by Hoka and on. And so they're really pushing. His seat is very hot and they're pushing for management changes to turn this ship around.

19:11They used the word comeback five times on the earnings call. So they realized they're in a major slump. And, you know, yeah, his seat is extremely hot. I think one of the things that they did incorrectly was they kind of neglected their relationship with wholesalers, to retail wholesaling partners, because what they try to do is just direct all their energy towards their direct selling strategy, get people to buy directly from Nike. But in the process, they neglected their wholesale business. So they're going to try to repair that relationship, going to try to refresh a few lines, start releasing new stuff.

19:42They've kind of been relying on Air Force Ones, Jordan Ones, Dunks, you know, the good old staples of years gone by. But they need some refresh right now because they're getting challenged on all sides. And you never want to bet against Nike, but this looks like a multi-year restructuring program, really. My winner of the weekend is the act of sitting on a plane doing absolutely nothing but looking at the in-flight map ahead of you. Yes, going full monk mode on a flight is the latest travel trend to go viral. The concept started gaining traction in May when a 26-year-old London guy named West posted about doing nothing on a seven-hour flight except stare at the flight map.

20:19Other people, mostly men, responded, hey, I do that too. Then others took it up as a challenge to see just how many typical human comforts they could avoid partaking in, avoiding water, headphones, free snacks, even the bathroom. The trend, whose official name is unfortunately rated R, seems to speak to the desire to unplug from the world and have that rare experience of being alone with your thoughts. Many who do it said it was form of meditation with the hum of the engine serving as white noise. Plus, you look so weird that people just don't bother you at all. Toby, the longest anyone's recorded themselves doing absolutely nothing on a flight is 20 hours from Perth to London.

20:57How long do you think you can make it? Oh, I wouldn't even make it 20 minutes. I don't want to be alone with my thoughts. But if you are from an older generation, before smartphones, you're listening to this, you're probably laughing right now because that's what you yourself used to do. If you weren't reading a newspaper or reading a book or something, there was nothing else to do. So I think a lot of maybe our older listeners are saying kids these days, they think they're inventing these trends. This is how we grew up. I think suffering as a service would do so well right now because so much of our lives are comfortable.

21:27All of our creature comforts are taken care of. So people, it's why running is having such a moment right now. People want to suffer in a controlled environment. And I think this is another example of that depriving yourself of human comforts on a flight. Couldn't be me, though. I've done this before. I just haven't filmed myself or doing it. All I do is look at the in-flight map. I mean, maybe I drink water and go to the bathroom like a normal person. But yeah, I definitely have that in-flight map going up. It's just literally the best content you could ever have. You do love the in-flight map.

21:55Before, everyone had Netflix. But after Blockbuster had faded from relevance, there rose a company that existed in a liminal space between physical retail and streaming. And that company was Redbox. Redbox was a vending machine for physical DVDs where the promise of a comfy movie night back home was as easy as a press of a button at your local 7-Eleven or grocery store. But now, Redbox looks to be no more after its owner filed for Chapter 11 bankruptcy. But even crazier than the idea that a DVD vending machine could work is the fact that Chicken Soup for the Soul Entertainment is the aforementioned owner that is going bankrupt.

22:31Yes, that Chicken Soup for the Soul, the same company who published the self-help books full of soothing, relatable, and uplifting tales, acquired Redbox for$375 million two years ago, but widening losses and a bloated portfolio of media products eventually caught up to it, and now Redbox and Chicken Soup are heading to bankruptcy court. This company owes pretty much every single movie studio in Hollywood money. It owes retailers like Target and Walmart money. It hasn't paid its employees in two weeks. This is an utter debacle. You said the word bloated. This company, it's Chicken Soup for the soul.

23:06They had the best nonfiction book series of all time, helping you just feel good about yourself. And then all of a sudden, they changed ownership and went on an insane buying spree, tried to become an ad-free and ad-supported streaming company. They bought Crackle as well, and then they bought Redbox for$375 million in 2022. Took on a ton of debt to do that. Now they can't even pay their employees. What a disaster. I remember this deal because this was 2022, right around meme stock madness. I thought that Chicken Soup for the Soul was going to become the next meme stock. It had all the ingredients there.

23:42It's a recognizable name. They just made this weird, not that buzzy, but kind of buzzy acquisition. So I actually, transparently, I bought a little couple shares of Chicken Soup for the Soul. It has just not gone well whatsoever. It also bought Redbox right at the wrong time where the decline of physical disc rentals. That was always happening. We knew that was happening. We knew that was happening. But then also the Hollywood strikes ended up, and it's the same thing. If you go to a Redbox, going to a Redbox is just a crazy thing to do in 2024, but even worse when there was no new titles there.