The clock is ticking for TikTok.

On Friday, a federal appeals court upheld the “TikTok Ban” law that would force China-based ByteDance to sell its immensely popular short-form video app next month or face exile from the US. ByteDance quickly promised to ask the US Supreme Court to weigh in — keeping all of Silicon Valley and Wall Street in suspense – but has otherwise been chill.

Tick-Tock, Tick-Tock, Tick-Tock…

The prospect of an imminent ban hasn’t even much bothered TikTok’s US-based employees, according to a Wired report on the company’s internal mood last month. And the arrival of the Trump 2.0 administration has sparked some optimism that the law could ultimately go unenforced. In a September post on Truth Social, his own social media site, Trump — who previously tried to ban TikTok — urged the platform’s fans to support him. “For all of those that want to save TikTok, in America, vote for Trump; the other side is going to close it up,” he said, marking a minor change in rhetoric that may reflect his cozy relationship with billionaire megadonor Jeff Yass, an investor in ByteDance. Trump’s inauguration comes a day after the law would go into effect, and, without a SCOTUS ruling, overturning the law would require congressional action.

TikTok has argued banning the app would violate the free speech rights of its 170 million US users, roughly half of the population. The legal case remains mostly theoretical — proponents of the law say the Chinese government could force ByteDance to retrieve and share sensitive information on US users, though they have no evidence that it has so far. In the court’s majority opinion, US Court of Appeals Judge Douglas Ginsburg writes that “TikTok never squarely denies that it has ever manipulated content on the TikTok platform at the direction of the PRC.”

If SCOTUS takes up the case, it could put a temporary freeze on the ban, keeping the site live until a ruling. In other words, TikTok is in limbo — which means so, too, are the Silicon Valley companies that compete, or do business, with it:

• Shares of Meta rose over 2% Friday reflecting the dominant view that TikTok’s loss would ultimately be Meta’s gain; also rising were shares of Alphabet (1.2%), Snap (2%), and Pinterest (2%).
• Oracle, meanwhile, counts TikTok as a major customer, and warned in June that a ban would hurt its business. Evercore ISI estimates TikTok accounts for as much as $800 million of Oracle’s annual sales; shares of Oracle were up nearly 3% anyhow, on Friday.

Supreme McCourt: Experts say a TikTok acquisition could cost as much as $100 billion, though ByteDance may also refuse to give up its all-powerful recommendations algorithm in the process. It would also probably be subjected to intense regulatory scrutiny; last week, Trump tapped Big Tech critic Gail Slater to lead the Department of Justice’s antitrust division. Still, at least one would-be buyer is getting serious: Frank McCourt, who told Axios last week he has as much as $20 billion in informal commitments from potential backers.

The S&P 500 notched its third-straight weekly gain Friday, lifting its year-to-date advance to more than 28%.

But the market’s sunny optimism, set against wintry December, will face a Game of Thrones-like test this Wednesday: An inflation report is coming. That could test the mettle of this year’s barnburner stock rally and the Federal Reserve’s plans for future rate cuts.

The Case is in the Details

Markets overwhelmingly expect a rate cut when Fed governors meet next week on December 17 and 18: Fed fund futures are pricing in an 86% chance of a 25 basis-point cut, according to CME FedWatch. But when the Fed entered rate-cutting mode, for the first time in four years, in September, the labor market was cooling and the stock market had experienced a selloff just weeks before. Those concerns are muted now.

The latest jobs report from the Labor Department, released Friday, showed the US economy added 227,000 jobs in November — well over economists’ projection of 200,000, and showing particular resilience after Hurricanes Helene and Milton. Payrolls in September and October were also revised up by 56,000. Meanwhile, consumer spending, a huge driver of market sentiment, has the holiday spirit: last week’s Cyber Monday saw a record $13.3 billion in sales, according to Adobe Analytics, days after preliminary figures indicated record spending on Black Friday. The National Retail Federation expects a record $902 per person spent this holiday season. 

Whether the Fed should issue another cut is in the details:

• While the economy added a decent chunk of jobs, a decrease in the labor force participation rate meant the unemployment rate ticked up slightly to 4.2% — which was expected. “The economy continues to produce a healthy amount of job and income gains, but a further increase in the unemployment rate tempers some of the shine in the labor market and gives the Fed what it needs to cut rates in December,” said Morgan Stanley Wealth Management chief economist Ellen Zentner.
• However, stocks are on an impressive run, with the S&P 500 trading at more than 22 times expected earnings for the next 12 months. That is the highest price-to-earnings ratio in over three years, according to LSEG Datastream. It might not be the best decision to cut rates when assets may be overvalued.

Inflated Risk: The consumer prices data due on Wednesday, if inflation readings come in above expectations, could prove an obstacle to the market’s seemingly unabated upward trend. But the slight unemployment uptick created what TD Securities strategist Molly McGown deemed a “higher bar” for a pause in rate cuts, meaning markets are likely to continue getting a boost from the Fed.

America controls a lot of the world’s equity. And by a lot, we mean almost all of it.

US equities now make up 70% of the MSCI World Index, which tracks the largest companies around the world, more than double the 30% level seen in the 1980s. While much of that is a direct result of the country’s strong economy and its successful businesses, it’s also based on faith that the US will continue to outperform every nation under the sun.

Of course, this also means that when American markets tumble, it’s not just America’s problem.

Very Valuable?

Out of the top ten largest companies on the planet by market cap, eight are based in the US. The country is known for being an innovation hub for emerging technologies such as artificial intelligence and quantum computing. Despite inflation and burdensome Fed interest rates, which are beginning to decline, America has consistently exhibited strong GDP growth and remains the largest economy in the world with one of the biggest consumer bases.

However, there are a few warning signs suggesting a strongly overvalued US stock market:

• Looking at the Buffett indicator, which measures total market cap relative to GDP, America’s calculation sits at 208%. A fair valuation of a market would fall into the 75% to 90% range. 
• There’s also the Shiller PE ratio, which calculates valuation based on a stock’s current price relative to a company’s average inflation-adjusted earnings over the past ten years. Right now, the Shiller ratio for the S&P 500 stands at 38.88, well above the historic average of 17.17.

Bubble Trouble: Rockefeller Capital Management’s Ruchir Sharma recently wrote in a column for the Financial Times that global investors are creating “the mother of all bubbles” as they commit more capital to a single country than ever before in modern history. “America is over-owned, overvalued and overhyped to a degree never seen before,” he said. If it’s a mania, and we’re not saying it is, it certainly knows no geographic boundaries.