Jobs, Cars, AI, and Financial Freedom

In this podcast, Motley Fool senior analyst Jason Moser and Chief Investment officer Andy Cross discuss:

• The recent jobs report.
• What the stress test means for banks.
• The current state of autos
• Cloudflare pushing back on AI crawlers.
• Stocks to celebrate financial freedom.

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A full transcript is below.

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This podcast was recorded on July 03, 2025.

Jason Moser: Jobs, cars, AI and financial freedom. You're listening, Motley Fool Money.

Welcome to Motley Fool Money, I'm Jason Moser. Joining me today, it's Motley Fool Chief Investment Officer, Andy Cross. Andy, thanks for being here.

Andy Cross: Jason, thanks for having me on the holiday week.

Jason Moser: Holiday week indeed on today's show, we're going to take a closer look at the state of the EV market. Cloudflare is, I guess, standing up to AI. We've got some stocks that make us want to celebrate financial freedom. But first, Andy, let's talk jobs and banks. The Jobs report came out this morning, a day early due to the holiday weekend. It seemed like a pretty good report. Markets receiving it well. It was good on the state and local government side. Whereas the federal side, it seemed like there's some more headwinds, which I guess shouldn't be surprising given the last few months with DOGE and their efforts to try to trim the fat, so to speak, but what did you see in this jobs report that stood out to you?

Andy Cross: Jason, I think it was a good report. It certainly was ahead of the consensus, but it wasn't blazingly great like it was maybe a few years ago. We saw interesting, we saw the futures. You mentioned the stocks rebound nicely, and the expectations for a rate cut had dropped from 25% in July down to less than 7%. Clearly, as the yields moved higher on the strength of this report, investors betting that maybe those rate cuts that they were maybe expecting in the summer are going to get pushed out. But what was really interesting to me is inside underneath the hood, Jason, healthcare and services very strong accounted for 40% of the 147,000 net gains. As you mentioned, state and government accounted for 32% of those gains as well. What was also fascinating, Jason, speaks to a little bit of the news we saw this week. Construction accounted for about 10% of the overall gains and specialty contracting construction. Focusing on very specialty roving, supplying, things like that, they were accounted for 100% of the construction gains, and that also speaks to why I think we saw Home Depot going after and putting out that acquisition for GMS, another specialty retailer, distributor to build out their distribution business on the contracting side. Strength there, I think, speaks to that acquisition of why it's so attractive for Home Depot.

Jason Moser: I'm glad you brought Home Depot up because it does seem to me like we're in a position where and the conversation goes on and on about housing supply, and it seems like there's just not enough supply to meet the demand. But when you look further out, you see the opportunity there, whether it's home builders, whether it's home improvement retailers like Home Depot or Lowe's, it seems like they're poised for, pretty good stretch here going forward as we see more investment made in the housing market here domestically.

Andy Cross: Jason, I think we just have to see rates start to normalize and that did not show up on this report. I didn't look at the home building stocks today. That's going to be a challenge, just the rate environment. Now, I think, over time, that will start to come down for a variety of reasons. I think that will lessen, but certainly today, we saw those rates jump. On the strength of this report. Interesting, Jason, also, still seeing some of the stress on those white collar jobs management, business and financial, that unemployment increased from 2.2% to 2.4%. Professional unemployment increased a little bit. Sales and offices unemployment rate increased a little bit. Even though the unemployment rate was pretty steady, we are seeing a little bit of stress on the office and those white collar jobs, which gets back to that quote from the Ford CEO talking about how at some point in the near future expecting that 50% of white collar jobs could be eliminated or replaced by AI.

Jason Moser: Wow. That's just an amazing statistic to think about there, and I'm hoping [laughs] that our jobs are still safe, AC, but we'll see. [laughs]

Andy Cross: Well, I think we're going to see a lot more of the next year or so. A lot of this show up in some of this job data, so I'm paying attention to that very closely.

Jason Moser: I think that makes a lot of sense. Let's pivot into banks here because just this past week we saw the banks all go through the stress test. The Fed went through the stress tests with all the banks here and in all 22 banks that were examined by the Fed last week passed the stress test. This is something that really popped up on the radar through the great financial crisis over a decade ago. But now it's encouraging to see, at least that we're putting the banks through this regular regimen of making sure that they're OK and healthy. It sounds like in this case, the Fed noted they found that large banks are well positioned to weather a severe recession, which is encouraging. Now, the result here shouldn't be surprising. We saw a lot of dividend increases and we saw a lot of share repurchase authorizations.

Andy Cross: Jason, it was a little bit of a milder stress test. They had lowered the bar a little bit, I think, in a more normal environment, which I think makes sense. Now expecting the test goals looks at a 30% drop in real estate prices or a 33% drop in home prices, and if the unemployment rate skyrockets or increases. But that's a little bit more milder than what they had before when the banks were in a little bit more difficult spot. A little bit of a lower bar, but the banks jumped way over it, and we saw these increases. We saw Goldman increase their dividend by 33%, JPM, JPMorgan by 7%, Bank of America by 8%. Naturally, we're going to see them start to return capital more to shareholders because that's essentially what banks are doing. They take in a lot of capital and they make good profits on their earnings base, and they spit that back out to shareholders. I think the markets would have been disappointed had we not seen those dividend increases after this announcement from the Fed.

Jason Moser: One thing I thought was interesting, they're talking about the stress test process. It can be taxing. It can produce volatility in this financials market. The Fed is looking at this and saying, well, we're going to try to address this volatility, and ultimately, we're going to propose that we basically average two consecutive years of stress test results as opposed to just going year by year. What do you make of that? Does that make sense to you and just giving us a little bit more of an average? It seems a bit more long term thinking in my mind.

Andy Cross: I think so. I think 10. Same thing, we talked about the jobs earlier. It's one month, and you really have to look at the average over time, and so we don't want to make too much of any one period. I think that same thing with looking at these tier 1 capital ratios, undoubtedly, the banks are in a much better spot now. Undoubtedly, they're better capitalized. We saw that not just in the little bit of more milder test that they achieved in past and the fact that so many I think, almost all of them, as you mentioned, all of them passed. We're seeing these large banks well capitalized, and I think that measurement over time is what I think investors really want to pay attention to. I think banks are interesting. I used to own Bank of America. I sold it, last year, and the stocks actually up since I sold it, and I had already made like 40 or 50% on it. I think banks are in a good spot. The valuations have started to creep up, have like those on a per book value basis or earnings basis. They are more elevated than historical norms. I think that's the expectation that, hey, over the next couple of years, the economy is going to be in decent enough shape and the bank's well capitalized to be able to take advantage of a pretty healthy consumer out there on both the commercial side and the retail side.

Jason Moser: Next up, EV sales, feel some headwinds. Andy, we saw a auto report this week that was, I guess, mixed would be the best way to put it. We saw some good things, we saw some bad things. But it does seem like while automakers saw sales slow down a little bit, it feels like maybe there were some impulse buying there in the front half of the year due to tariff uncertainty and whatnot, Tesla really stood out here. When we talk about EVs, Tesla is going to be obviously the headline maker there. But Tesla, they've run to a little bit of a buzz saw here. Tesla global vehicle sales fell by 13.5% in the second quarter compared to a year ago. It wasn't just Tesla that felt this. Other automakers are feeling the pressure here. But what do you make of this? Was this a lot of front loading? Were people impulse buying, getting out there on the front half of the year because of tariff uncertainty, or is there a little bit more to make of this?

Andy Cross: We certainly saw outside of Tesla, when you look at Ford's deliveries, they're up 14% or the unit sales up 14% this quarter, very healthy on the Ford side, but not on the EV side. It was all on the industrial combustion engine and the hybrid for Ford's growth. But as you mentioned, Jason, Tesla saw continued weakness through this quarter. You mentioned the deliveries fell 13.5%. Now, that was above the whisper numbers out there. I think that's why you saw the stock react positively. I think the concern was it's just going to be so much worse. A little bit higher than whisper numbers, even though it was below the published stated estimate numbers, it was higher than the first quarter, so we saw a little bit of improvement into the second quarter. Cybertruck and the other category, which is the smallest part of Tesla's sales fell almost 52%. That was a continued weakness, and we see continued struggles with them in China as we're seeing more and more heated up competition really start to ramp up into China. Obviously, Tesla has some of these branding issues. They're well documented. We've talked about them before.

The story for Tesla it's just the investing cases not about what is happening right now. It's really what's going to happen with full self driving, the Robotaxi, all of those initiative, even into robotics, that is going to be, if it works out, the big driving case and the success factor for Tesla. I think the expectations were these were two bad quarters. If you're an investor, I think you have to see now Elon Musk back, driving sale. He's running the sales department and hopefully start to rebound a little bit throughout the second half of the year. Hopefully we'll get some new models and some refresh brand acceptance out there for Tesla shareholders.

Jason Moser: We're not going to just pick on Tesla here. Ford, Hyundai, Kia, they all reported heavy drops in their EV sales. Ford said EV sales fell more than 30% from a year ago. It was interesting to me to see that GM actually bucked the trend there. They said their EV sales more than doubled from the same time last year, which I just thought was fascinating. What is the GM EV? What's out there driving this?

Andy Cross: I know, and you think about just Ford's success across outside of EV, I mentioned the strength in the combustible and the hybrids, really, and across. Really they're so big into SUVs and trucks and they saw a massive growth in those during the quarter. I think a lot of that was pulled forward, as you mentioned earlier, Jason. We saw tariff increases. Ford had their employee pricing for all promotions, so they went out there on the pricing side. We'll see how that ends up on the gross margins. It will be something to watch with Ford, but clearly having a lot of success in hybrid and combustible engines. It is interesting to see their EV is just not getting a lot of traction. That recall on the Mustang Mach-E. Think about GM having some success there. I don't know if that is the story for the future of GM. I think clearly EVs right now, as they are continuing to work through a lot of their battery technology. I think that's just a continued struggle in the market and not getting that much acceptance from the marketplace, especially with, I think, oil and gas prices where they are so nicely low these days.

Jason Moser: Coming up, Cloudflare jumps into the AI ring and a couple of stocks to celebrate our financial freedom. Andy, there's some interesting news from Cloudflare this week, and we've been batting this back and forth here at work. According to the company, right now, they're basically giving their new customers that sign up to use Cloudflare, they're going to be asked if they want to allow or block AI crawlers. That AI technology that goes through there and scrapes websites to get all of this data that feeds those large language models. The company will also allow publishers to charge AI crawlers for access using a new pay per crawl model. Now, Andy, this makes me think a bit. The first thing I thought about when I read into this, it makes me think a bit about Amazon.

Amazon's mission to be the most customer centric company in the world. From Cloudflare's perspective, this seems like a very customer centric move. They're saying, hey, we want to help you protect your data. We want to help you protect your content and the stuff you're creating. I understand the other side of it, as well. The data needs to be out there in order for these large language models to improve and train. Is this a smart move by Cloudflare?

Andy Cross: I think it is, Jason. Cloudflare is accountable for maybe 20% of global Internet traffic out there. They're a content delivery network and a cybersecurity firm, so helping their publishing clients and other clients move data around. Protecting them and taking their interests in mind is very smart for Cloudflare. I actually was very positive on this. This is a business that I owned before and sold earlier this year. I just think this is actually a very positive move because no one is really addressing the elephant in the room, I think, Jason, it gets back to the online advertising business. Matthew Prince in his blog at Cloudflare, when he talked about what they are dubbing Content Independence Day, July 1st, Content Independence Day and for them to help protect these publishers. He talked about the evolution of online search and advertising, starting with the history of Google in that blog post. I think now he is starting to address. Listen, to support the publishers that are responsible for so much content out there in the creators, we have to help them to be able to support the models that go into the AI engines that so many of us now are relying on. They're starting to address the business model behind of what this might look like. They even talked about maybe opening a marketplace where AI engines and AI chatbot companies like OpenAI and Perplexity and even Google itself and others can collaborate with publishers in there. I find that very encouraging because this is changing so fast. I'm glad someone with the reach of a Cloudflare is talking about this. But of course, it is talking their own book because they're trying to support some of their key clients in the publisher realm.

Jason Moser: Of course. Cloudflare was like 20% of all Internet traffic. This is not a small player in the industry. Do you feel like this is something that has the potential to snowball and maybe cause some near term headwinds in the advancement of AI?

Andy Cross: Jason, I don't think so. The concern is, and I'm sure in fact, I think maybe we heard from the likes of OpenAI. There is technology out there that is part of websites to help tell and direct search crawling engines go here, don't go here, but it's not enforced. It's more guidance and I think what Cloudflare is saying, we need another level of security. They will be concerned, but I do think this starts to, like I said before, address how do we continue to get new fresh content out there and have that, get monetized in a way that supports those content creators, but also says, no, we need that content because it's a very competitive marketplace. We have so many from DeepSeek and others in China, creating more advanced LLMs out there that they are continuing to invest in. They probably not abiding by maybe all the rules out there. It's a very competitive space. I just think I'm glad that we're seeing some conversation around how we can do this better in a sustainable way for all of the players and stakeholders going forward.

Jason Moser: It's worth noting, too. Cloudflare has already got customers. They've talked about early adopters here. There's Conde Nast, Time, Pinterest, Quora, Reddit. There are companies jumping on board, and these are companies obviously responsible for a lot of content that's out there on the Internet. It'll be interesting to see how this develops. Look, Andy tomorrow, of course, is the 4th July, in the immortal words of Homer Simpson, stand back while I celebrate freedom. Before we wrap up today, what is a stock? I thought this would be fun to take a look at some of the stocks that we like here. Before we wrap up, what's a stock in your own portfolio that makes you think, man, I love having that one in there. That stock or those stocks, they're leading me to my financial freedom.

Andy Cross: Well, Jason, I have a few I'll mention, including one that's also a little bit of a miss by me, too, from an allocation perspective. Obviously, I've talked about Nvidia's importance, and my portfolio has done so well, it's up more than 1,200% for me, and it's a large position in my portfolio. Netflix is also one that's done very well for my family, and I'm just very thankful to see those into the portfolio along with Chipotle. But one that goes under the radar that we never talk about that I invested more than 10 years ago, is a little company called RBC Bearings and the ticker symbol is RBC. I think the ticker symbol used to be ROL.

Jason Moser: I'm feeling a little Ron Gross here, Andy.

Andy Cross: It does high precision ball bearings. It's all about ball bearings, these days, Jason. [laughs] Ball bearings and other technology goes into aerospace and defense. I think from the likes of TransDigm and Halmet and others that we've talked about, that aerospace market continues to grow at mid single digits over years and years. It's very technical. You need very complex technical machinery that goes into our airplanes, goes into our equipment. RBC has just played into this growth market, and it's just thumped the market over time, making smart little acquisitions, growing their business, getting some margin expansion, and just one when I look back on it, it goes under the radar. I didn't, unfortunately, add enough to it, Jason. I wish I had added more to it along the way. But that one's up very nicely as a multi bagger for me, one that I'm happy to see my portfolio.

Jason Moser: I love all those names. When I look at my portfolio, I feel the same. There's so many companies in there that I just I love to see that I own them day after day. Growth style investments. I'm thinking of things like The Trade Desk and Cloudflare as we mentioned before, companies have just performed very well for me over time. Then I look to the boring staid companies, like Home Depot stands out to me. To me that's like when you're a kid and you wake up and it's Christmas morning and you go find all the presents. That's what I feel like every time I go into Home Depot. I'm just always eyes saucered and just looking all over the place. I know that 20 years from now, I'm still going to be going to Home Depot because I'm going to need to do something or I'm going to want to do something for my house. You got the dividends coming in along the way. Then I talked about this with David Gardner recently just Waste Management. I mean, just a boring business but we produce a lot of trash. That's the company that just has the biggest network in the country, as far as disposal sites. Waste management and Home Depot on the dividend side are just companies that I look at my portfolio, I think, man, you know what? I'm really glad I own those.

Andy Cross: Jason, this is why I love investing because there's so many different ways to make money and to hopefully earn our way toward that financial freedom from growth to dividends to value and all things in between and international. Looking across my portfolio, having such an appreciation, like you were saying, from the likes of Home Depot, which is my largest position, all the way down to some small cap companies.

Jason Moser: We'll leave it there. Andy Cross, thank you so much for being here. Have a great 4th of July. We'll see you next time.

Andy Cross: Thanks, Jason.

Jason Moser: As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against. Don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. Advertisements or sponsored content are provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. I'm Jason Moser. Thanks for listening. See you next time.

Bank of America is an advertising partner of Motley Fool Money. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. JPMorgan Chase is an advertising partner of Motley Fool Money. Andy Cross has positions in Alphabet, Amazon, Chipotle Mexican Grill, Home Depot, Netflix, Nvidia, Pinterest, RBC Bearings, Tesla, and The Trade Desk. Jason Moser has positions in Alphabet, Amazon, Chipotle Mexican Grill, Cloudflare, Home Depot, The Trade Desk, and Waste Management. The Motley Fool has positions in and recommends Alphabet, Amazon, Bank of America, Chipotle Mexican Grill, Cloudflare, Goldman Sachs Group, Home Depot, JPMorgan Chase, Netflix, Nvidia, Pinterest, Tesla, and The Trade Desk. The Motley Fool recommends General Motors, Lowe's Companies, TransDigm Group, and Waste Management and recommends the following options: short June 2025 $55 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.