Israel-Iran, Economic News, Valuations and Buckingham on Yahoo Finance

The Prudent Speculator Weekly Commentary is expertly curated every week as a valuable resource for stock market news, investing tips, business insights, and economic trends as it relates to value stock investing. In this week’s Market Commentary, we discuss Israel-Iran, Economic News, Valuations and Buckingham on Yahoo Finance. We also include a short preview of our specific stock picks for the week, the entire list is available only to our community of loyal subscribers.

Executive Summary

Israel-Iran – Prior Hostilities in the Middle East & Historical Equity Return Data

Wall of Worry – Always Something to Fret About, but Long-Term Trend has been Higher

Buckingham on Yahoo Finance: State of the Markets – Uncertainty & Unloved Rebound

Buckingham on Yahoo Finance: Positioning/Stock Picks – Trimmed More Fairly Valued Names and Added Undervalued Names; 5 Current Favorites

Buckingham on Yahoo Finance: Advice for Investors – Historical Data on Tariffs, Fed, Interest Rates, Inflation and Recessions Allows for More Peaceful Slumber

Econ News – Mixed Numbers but Growth Still the Forecast

Inflation – Better News on CPI & PPI

EPS – Corporate Profit Growth in 2025 and 2026 Still the Expectation

Valuations – Attractive Metrics for Value Stocks

Stock News – Comments on ten stocks across four different sectors

Israel-Iran – Prior Hostilities in the Middle East & Historical Equity Return Data

We know that equities in the fullness of time have overcome every prior major disconcerting event here at home and around the globe, but that does not mean that they can’t have sizable short-term negative impacts,

as was seen on Friday when stocks stumbled as Israel launched an attack on Iran’s nuclear facilities and other targets, with Iran quickly responding. With the price of oil jumping and fears rising that the U.S. could be drawn into the hostilities, the Dow Jones Industrial Average skidded more than 769 points, putting a major damper on what had been shaping up as another solid week that had pushed the rebound in the S&P 500 from the recent April 8 lows to more than 21% at Thursday’s close.

Equity investors have always had to put up with volatility on the way to excellent long-term returns,

and Friday’s drop was relatively tame, while there is no way of knowing how the latest entry on the roster of Middle East conflicts will play out, but history has shown that it has always been best for long-term-oriented investors to stay the course during previous Arab-Israeli conflicts,

as stocks have long climbed a wall of worry,

Wall of Worry – Always Something to Fret About, but Long-Term Trend has been Higher

enduring 27 official Bear Markets along the way.

Buckingham on Yahoo Finance: State of the Markets – Uncertainty & Unloved Rebound

The appearance came on Thursday, but your Editor was interviewed last week on Yahoo Finance TV: https://finance.yahoo.com/video/investors-embracing-volatility-110013772.html

Ahead of the interview, notes were provided to the producers and we share them, along with updated charts, to further illustrate the points…

Current State of the Markets

As is always the case, uncertainty rules the day, with developments on the trade front, utterances from Federal Reserve officials and economic data releases driving short-term market moves. Anything can happen in the near-term, but the “Liberation Day” Bear Market,

and subsequent Bull Market from the April 7 and April 8 intraday lows provided yet another reminder that volatility is part of the investment process and that the only problem with market timing is getting the timing right.

After all, they don’t ring a bell at market bottoms, and it isn’t like the last two months have quelled questions over tariffs, economic data is hardly robust, the Federal Reserve has not altered monetary policy and drama reigns on the geopolitical stage. Alas, many investors again have been left sitting on the sidelines this time around, with the AAII Bull-Bear Sentiment Survey still tilted more toward fear than greed, though the optimists on Thursday finally edged above the pessimists…just in time for the sizable market whack on Friday.

Buckingham on Yahoo Finance: Positioning/Stock Picks – Trimmed More Fairly Valued Names and Added Undervalued Names; 5 Current Favorites

How Are You Positioning / Stock Picks

Keeping in mind that our time horizon is measured in years and not months or days, we will always believe that time in the market trumps market timing. Not surprisingly, we remain optimistic about the long-term prospects of our broadly diversified portfolios of what we believe are undervalued stocks.

We have been endeavoring to take advantage of market volatility by capturing some of our winnings on less undervalued stocks like Walmart (WMT – $94.44), Tapestry (TPR – $78.91), Allianz (ALIZY – $39.24) and Deere (DE – $509.59), while swapping out of names like Nordstrom (JWN) and Foot Locker (FL), which had buyout offers, and Pinnacle West (PNW), a utility that had become expensive.

Those sales freed up capital to put into other attractively priced and battered stocks like apparel retailers Abercrombie & Fitch (ANF – $74.66) and American Eagle Outfitters (AEO – $9.31), banking giant USBank (USB – $42.99), alternative energy play First Solar (FSLR – $175.20) and power-generation company NRG Energy (NRG – $152.04), with that last one already seeing us take some money off the table after the stock soared more than 60% since our initial purchase.

Each of those stocks had suffered a significant decline in price with the punishment in our view not fitting the crime. We still like those five stocks, but we might focus on these five stocks that have yet to have much time in the sun this year for new purchase consideration: Oil & Gas concern Civitas Resources (CIVI – $33.35), discount retailer Target (TGT – $95.37), appliance maker Whirlpool (WHR -$90.24), pharma titan Merck (MRK – $81.71) and package delivery giant United Parcel Service (UPS – $100.00). Each trades for a low multiple of earnings and boasts a big dividend yield.

Buckingham on Yahoo Finance: Advice for Investors – Historical Data on Tariffs, Fed, Interest Rates, Inflation and Recessions Allows for More Peaceful Slumber

Advice for Investors

It is not easy to ignore all the disconcerting events and troubling news that bombards investors, especially in today’s sensationalized media climate and polarized political environment. Still, we like the words of Vannevar Bush who said, “Fear cannot be banished, but it can be calm and without panic; it can be mitigated by reason and evaluation.”
Reason and evaluation in mind, we are students of market history and when one looks at the long-term evidence, they will see that equity prices have moved dramatically higher over the last century, even as tariffs of some sort have always been part of the landscape,

including since Trump 45 launched a Trade War in March 2018 when the Dow was 25000.

Studying the historical returns data also reveals that stocks, especially those of the Value variety, have moved higher, on average, whether the Federal Reserve is tightening or easing monetary policy,

whether interest rates are moving up or down, or they are high or low,

and whether inflation is rising or falling or whether it is elevated or subdued.

True, the evidence from the 15 prior “official” economic recessions shows that stocks have lost modest ground, again on average, but the beginning and ending of the contraction is not known in advance and the year prior to recession has seen solid average returns in the 8% range for Value stocks,

and the 12 months after a recession has witnessed massive average returns in the 30% to 40% range.

Of course, a U.S. recession is not the forecast out in the last week or so from the OECD,

or the World Bank.

To be sure, both of those entities are downbeat in their latest outlooks for the U.S. and global economies, but the estimate from the Atlanta Fed out on June 9 for real (inflation-adjusted) Q2 domestic GDP growth stood at a hefty 3.8%,

Econ News – Mixed Numbers but Growth Still the Forecast

while there were better-than-expected readings out last week on small-business optimism,

and consumer sentiment.

Yes, it is likely that the economic growth over the balance of the year will not be as strong as the Atlanta Fed is projecting for Q2 and first-time filings for unemployment benefits have moved higher in recent weeks,

Inflation – Better News on CPI & PPI

but there were better-than-predicted figures released last week on inflation at the consumer level,

and the wholesale level,

which pushed higher the odds for cuts in interest rates per betting in the Fed Funds futures market.

EPS – Corporate Profit Growth in 2025 and 2026 Still the Expectation

Time will tell whether we end up with “good news” rate cuts from Jerome H. Powell & Co., as Fed Governor Christopher Waller suggested two weeks ago could happen later this year, but solid corporate profit growth is still the expectation over the balance of 2025 and 2026,

Valuations – Attractive Metrics for Value Stocks

while the kinds of stocks we have long championed remain reasonably priced relative to current interest rates.

Stock News – Updates on ten stocks across four different sectors

Keeping in mind that all stocks are rated as a “Buy” until such time as they are a “Sell,” a listing of all current recommendations is available for download via the following link: https://theprudentspeculator.com/dashboard/. We also offer the reminder that any sales we make for our newsletter strategies are announced via our Sales Alerts. Jason Clark, Chris Quigley and Zack Tart take a look at earnings reports and other market-moving news of note out last week for more than a few of our recommendations.