00:00 Brian Sozzi

Welcome back to opening bell on Yahoo Finance. Checking in on the markets on this jobs report, uh, I we should say Thursday where the economy showed it created a better than expected 147,000 job, seeing green across the screen as the early vibe off of this jobs report is that it's not too bad, not too good and does not completely remove a rate cut from the Fed, probably at the September meeting. All right, let's fire up our stock of the day, McDonald's. McDonald's shares caught my attention as they have been an unsavory performer of late in the face of a rip-roaring stock market. Stock has down nearly 6% in the past month underperforming the S&P 500s 5% gain. A new note from Guggenheim says the underperformance reflects two factors. One, investors aren't Mclovin defensive stocks at the moment, and two, the low-income consumer remains under financial pressure. Jumping into the Yahoo Finance platform, I find it very interesting that the street remains largely up on Mickey D's when looking at their analyst ratings. This could be the recipe for a negative surprise when McDonald's reports earnings in just a few weeks. Still with me is my round table, Brooke DePalma, Jay Hatfield, and George Goncalves. Um, Brooke, let me start with you because you cover restaurants here for us. You know, earlier in the week, you and I were talking about the move higher in Cava. Um, a lot of optimism, or or some renewed optimism in that stock. McDonald's not the case, underperforming the S&P 500. And, you know, not only is the consumer under pressure, but McDonald's hiked prices really across the board.

03:06 Brooke DePalma

Yeah, Brian, what we're really seeing here is this struggle for McDonald's both internally, as they look to overcome that E coli outbreak that hit the company last fall. Also, they're struggling to maintain their value leadership, and they have this broad marketing calendar that they're really trying to ramp up heading into the summer, with that reintroduction of snack wraps as they look to regain that leadership. Now, big picture here though, when you think about that big beautiful tax bill that's currently in the house, that also could have implications for the low-income consumer, which is primarily McDonald's audience here. Think about the Medicaid and SNAP cuts that will likely come as as an impact of that big beautiful tax bill, and that can have an impact on just how much low-income consumers have to shop. And when you think about McDonald's, and like you said, compare it to something like Cava, which has more of a broad, wide-ranging key audience where consumers are really looking for value here, we've seen their foot traffic tick up in recent weeks. And McDonald's really stayed flat here, because bottom line here is consumers really want the best bang for their buck. And right now, with McDonald's, maybe they're just not seeing it in this environment.

04:54 Brian Sozzi

George, let me get over to you. Uh, how challenged from your vantage point is the the the low-income consumer here in in the United States?

05:10 George Goncalves

Look, I I would argue the low-income consumer's probably been in some version of their own recession for the last 18 months in and out, and and they really have not benefited from kind of the broader kind of equity market moves, and just the economy doing relatively well, it hasn't really trickled down. So I do think that the low-end consumer has been, you know, really left behind. I mean, they have really high debt loads. Interest rates matter to them actually even more so, so that's another reason why to cut. So I I do think that that's, you know, holding back the consumer overall.

06:20 Brian Sozzi

Jay, is it hard to bet on stocks that have any exposure to the low-income shopper here?

06:32 Jay Hatfield

Well, we do think that that part of the story is pristine. But the the key element to focus on with McDonald's, and we do own it in our large cap dividend fund ICAP, but we're underweighted, is that its beta, or sensitivity to the market, is only 0.35, which is one of the lowest. That's below utilities. So it gets used by institutional investors, mutual funds, as a defensive play. And we're quite optimistic about the market. We have a 6,600 target, and we do think we're going to have a strong July rally, like we normally do. So in that market, you know, as you're seeing today, when the stock market's super strong, the high beta stocks are outperforming their beta, and the low beta stocks are underperforming their beta. So we would be neutral to negative on McDonald's until we get into the normal August, September swoon. And that's when that stock might start working.

08:16 Brian Sozzi

Jay, let me stay on you. Then, what are you bullish on?

08:23 Jay Hatfield

We are bullish on really high beta stocks. So we like Broadcom, and all these stocks have betas close to two, so it's twice as risky as the market. So we like Amazon and Broadcom on the tech side. On the financial side, we really love Goldman Sachs and KKR. Uh, KKR sold off during the tariff tantrum. Goldman is benefiting from AI, IPOs, and a slowly growing M&A market. So we're bullish, and both of those stocks, like I said, are are quite high risk. So they're not going to work if we're wrong about the market. So should do well in July.