EPS, Government Shutdown, Volatility and more Economic News

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 EPS, Government Shutdown, Volatility and more Economic News. 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

September – Seasonally Weak Month Continues to be Favorable

Powell – Uncertain Outlook; Rate Cuts Still Expected

Econ News – Favorable Stats; Solid GDP Growth the Forecast

EPS – Healthy Growth Projected for 2025 & 2026

Inflation – PCE In Line; Long-Term Expectations Decline

Wall of Worry – Stocks Have Overcome Every Prior Disconcerting Event

Volatility – Stocks Go Up and Down, but Long-Term Trend Is Up

Valuations – Reasonable Metrics for our Portfolios; Value Returns Not Excessive

Stock News – Updates on TPR, INTC, MU, JBL & ACN

September – Seasonally Weak Month Continues to be Favorable

The trading week just completed ended on a high that pushed both the Russell 3000 Value index and the S&P 500 Equal Weight index modestly into the green for the full five days. There are still two trading days to go, but September has been a terrific month thus far, for our kind of Value Stocks and Dividend Payers, bucking the historical propensity for red ink.

Of course, given new tariff announcements last week on pharmaceuticals, big trucks and furniture, many are likely surprised that equities held up as well as they did, even as the long-term evidence shows that the markets have performed well despite duties put in place under Trump 45 and Trump 47.

Powell – Uncertain Outlook; Rate Cuts Still Expected

Investors also had to contend with a mixed economic and inflation outlook out on Tuesday from Jerome H. Powell,

in which the Fed Chair was quick to remind that the course of monetary policy remains very much uncertain,…

Near-term risks to inflation are tilted to the upside and risks to employment to the downside—a challenging situation. Two-sided risks mean that there is no risk-free path. If we ease too aggressively, we could leave the inflation job unfinished and need to reverse course later to fully restore 2 percent inflation. If we maintain restrictive policy too long, the labor market could soften unnecessarily. When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate.

…even as the Fed Funds futures betting is still calling for as many as two 25-basis-point cuts in the Fed Funds rate by year end and as many as four by this time next year.

All else equal, lower interest rates should be better for stocks, but seven decades of evidence shows that equities have performed fine, on average, whether the central bank is tightening or easing monetary policy.

And the Fed arguably received data last week that supported the group’s economic projections from a couple of weeks ago that called for better real (inflation-adjusted) GDP growth this year than in the June estimates,

Econ News – Favorable Stats; Solid GDP Growth the Forecast

as Q2 growth was revised sharply higher to an impressive 3.8% from the previous figure of 3.3%

while new home sales for August at a seasonally adjusted rate of 800,000 blew away estimates of 650,000,

durable goods orders excluding the volatile transportation sector last month saw a better-than-forecast increase of 0.4%,

and first-time filings for unemployment benefits in the latest week dipped to 218,000, a level that is back down near multi-generational lows.

Those data led to an increase in the Atlanta Fed’s estimate for Q3 real GDP growth to 3.9%,

EPS – Healthy Growth Projected for 2025 & 2026

with the relatively strong economy continuing to support healthy corporate profit comparisons,

while we note that despite not-exactly-enthusiastic commentary that accompanied the release of the September 2025 Interim Economic Outlook,…

Global GDP growth is projected to slow from 3.3% in 2024 to 3.2% in 2025 and 2.9% in 2026, as higher tariffs and ongoing policy uncertainty slow down investment and trade.

In the United States, growth is projected to fall sharply from 2.8% in 2024 to 1.8% in 2025 and 1.5% in 2026 owing to higher tariff rates, moderating net immigration and reductions in the federal government workforce.

…the Organisation for Economic Co-operation and Development (OECD) raised its guestimate for Global GDP growth to 3.2% this year, up 0.3% from the June projection, and for U.S. GDP growth to 1.8%, up from 1.6%.

Inflation – PCE In Line; Long-Term Expectations Decline

On the inflation front, the Fed’s preferred measure, the core Personal Consumption Expenditures Index (PCE), showed an increase of 2.9% in August, in line with expectations and unchanged from the July advance,

while longer-term inflation expectations, per the Univ. of Michigan, pull back to 3.7%, compared to 3.9% in the prior survey.

Wall of Worry – Stocks Have Overcome Every Prior Disconcerting Event

No doubt, there remain plenty of reasons why investors might fret, as headline risk is omnipresent,

including the looming U.S. government shutdown,

Volatility – Stocks Go Up and Down, but Long-Term Trend Is Up

but those who have stayed the course through the inevitable volatility have been handsomely rewarded in the fullness of time,

as the periods in the green have proved far more lucrative than the times in the red,

and the odds are stacked decidedly in favor of the long-term-oriented Value and Dividend investor.

Valuations – Reasonable Metrics for our Portfolios; Value Returns Not Excessive

Yes, we must always be braced for downside moves as there have been 27 “official” Bear Markets over the last century,

and even a 20% plunge on an intraday basis earlier this year,

but we enjoy peaceful slumber, given the inexpensive valuation measures and generous dividend yields of our broadly diversified portfolios of what we believe are undervalued stocks,

especially as we do not think the gains, despite being very good on Value stocks over the last two decades, have been excessive.

Stock News – Updates on five stocks across five 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.