Isaac Boltansky, BTIG Director of Policy Research, joins Yahoo Finance Live to discuss Kevin McCarthy’s bid for House speaker, what investors should be watching for this year, public policy, the U.S. government and TikTok, and the outlook for federal spending.

Video Transcript

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JULIE HYMAN: Congressman Kevin McCarthy facing an uphill battle in his bid for House Speaker. The vote is expected this afternoon. Joining us with more and more on what investors should be watching this year overall, Isaac Boltansky, BTIG director of policy research.

Happy New Year, Isaac. It's great to see you, maybe not such a happy beginning of the year for Kevin McCarthy, which has really been a battle for him to win this House Speaker post. How likely do you think it is that he will prevail, and why does it matter? Why is this such a closely-watched race?

ISAAC BOLTANSKY: Good morning, and Happy New Year right back to you. Happy to be with you.

And look, I'll tell you what I told my client so far this morning, which is this speaker's race is, I think, indicative of the way that this year is going to play out here in DC. And for me, it's basically a dumpster fire on top of a train wreck. And the reality is it's that old saying that you campaign in poetry but you govern in prose is a real one.

And it's easy to organize a political party around certain ideals. But governing is tough, and I think what we're going to see today is Kevin McCarthy struggle to get the speakership. He will not get it on the first ballot, which, by the way, Julie, is the first time that's happened in a century, where a speaker didn't get it on the first ballot.

And I don't know how it's going to end. There's a very good chance that we go into the wee hours of the morning. But for investors, I think the takeaway here is governing is going to be tough for the next year or so. And if we can't have one of the major political parties agree to who their leader is, how are we going to have agreement over things like the debt ceiling, like the federal funding deadline in September? And that's what I think is the real takeaway for investors.

- Isaac, that said and with the changes that we're going to be watching for in Congress as well, what is the biggest shift in public policy that investors should be preparing their portfolio for this year?

ISAAC BOLTANSKY: Sure. I think there are two. Number one is the fiscal [? put ?] is gone, and that's something that over the past few years with COVID, we've seen extraordinary, historic levels of spending. That's over.

And so if we do have a downturn this year, we should not expect federal spending to come and save the day. We're going to have a Congress with many of its constituents and many of its leaders getting in there because of the inflation reality. So they will be very, very opposed to any spending increase.

So that's the number one policy takeaway. Number two is when Congress becomes less active, we should expect the alphabet soup here in DC, everything from the EPA to the CFPB, to become more active. And that administrative state will get going here in the next few weeks.

- Isaac, it doesn't sound like a backdrop that is just ready to embrace any form of new crypto regulation, which, of course, many would argue, in the wake of FTX, is badly needed.

ISAAC BOLTANSKY: Yeah, look. I think that we are going to have some serious and some substantive discussions about crypto regulation. And I do believe that we're going to have stablecoin legislation this year. And that, Brian, is because lawmakers kind of understand what stablecoins are.

They're kind of like a money market account. They're kind of like a deposit account. They can wrap their arms around them.

But anything more sweeping, anything more comprehensive, I think is going to face the same headwinds we've seen over the past year, which is you have jurisdictional fights. You have too many cooks in the kitchen from both an agency perspective and a lawmaker's perspective. And those cooks still haven't really agreed on what they want to cook because some of them want to ban crypto altogether while some want to have a more constructive regulatory regime that allows for growth and innovation.

- There seems to be more agreement, perhaps, on the cooking of TikTok, so to speak, if we're drawing an analogy here, Isaac. We recently had the ban on federal employees having TikTok on their phones. Where do you think we go with that in 2023 if Congress is going to be looking at broader regulation?

ISAAC BOLTANSKY: You know, some estimates suggest that TikTok's ad revenues last year were around $6 billion, and that is incredibly meaningful, especially when we start talking about the potential to ban TikTok domestically because those ad revenues would obviously go elsewhere in the online advertising ecosystem. So this is something that our clients care deeply about and we try to follow closely, accordingly. Personally, Julie, I'm bearish on TikTok getting banned.

We're going to have a constant barrage of headlines. In fact, the new chair of the house China committee called TikTok digital fentanyl, which I think is a noteworthy framing for TikTok more broadly. But DC is about people and process, Julie, and when I look at the process, you still don't have enough support for the legislation on Capitol Hill.

There's only one Democratic co-sponsor for a bill that would ban TikTok. And we look at the people, it's been noteworthy to me that some of the top Democrats, including Mark Warner from Virginia and Angus King, two Democrats who are on the Senate Intelligence committee, are still very concerned about banning TikTok because of some of the censorship dynamics. And so look. Ultimately, I think that you're going to have a lot of hand-wringing, a lot of finger-pointing. But my bet is that TikTok gets a deal with CFIUS the multi-agency regulator, later this year, and that they're still operating a year from now.

- All right, well, we'll take that to the bank, Isaac, and we'll check back in with you, of course, periodically to see how things are going down there in DC. Thanks so much for being here. Isaac Boltansky, BTIG director of policy research. Appreciate it.