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 the 2025 Outlook, Value Perspective, Inflation and More. 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
2025 Outlook – TPS Webinar & Q&A Replay & Slide Deck
Newsletter Trades – 1 Sale for 1 Portfolio
Value Perspective – 10 Straight Down Days for R3KV; Very Good Longer-Term Returns; Reasonable Valuations; Tech Bubble History Lesson
Sentiment – AAII Less Bullish Last Week
Rates – Big Jump in U.S. Treasury Yields; Stocks Have Performed Fine, on Average, whether 10-Year Yield is Rising/Falling
Inflation – Chances Fall of Numerous Fed Rate Cuts in 2025
Econ Update – Mixed Numbers but Solid GDP and EPS Growth Still the Forecast
Seasonality – Most Wonderful Time of the Year
Stock News – Updates on AVGO, ORCL, CVS, KR, CMCSA, GOOG, JPM & OMC
Value Perspective – 10 Straight Down Days for R3KV; Very Good Longer-Term Returns; Reasonable Valuations; Tech Bubble History Lesson
Even as the pullback has been mild and has not yet pierced the 5% mark, a setback magnitude that historically has taken place three times per year, on average, December has provided yet another reminder that while the long-term trend in stocks is higher, there have always been selloffs along the way.
Believe it or not, the Russell 3000 Value index has dropped for 10 straight trading sessions, which has added to the dispersion of returns between Value and Growth, and pushed inexpensively priced stocks to relative levels not seen since the Tech Bubble burst in the year 2000,
which was a very good time to be holding on to Value!
And speaking of Value, it isn’t like returns on the kinds of stocks that we have long favored have been lousy, especially when compared to international equities, commodities and bonds,
while we like that the Russell 3000 Value index is far closer to its long-term valuation norms than its Russell 3000 Growth counterpart, on a price-to-earnings basis,
as well as Price to Sales,
and Price to Book Value.
Even better, by our way of thinking, the valuation metrics for our broadly diversified portfolios of what we believe to be undervalued stocks are more attractive than those of the Russell 3000 Value index,
while it was nice to see The Wall Street Journal pointing out that valuations should matter and that there are opportunities in the market of stocks,
Sentiment – AAII Less Bullish Last Week
not to mention that there was a decline in optimism on Main Street last week, improving the contrarian AAII Bull-Bear investor sentiment gauge.
Rates – Big Jump in U.S. Treasury Yields; Stocks Have Performed Fine, on Average, whether 10-Year Yield is Rising/Falling
True, last week saw a big increase in interest rates, with the yield on the 10-Year U.S. Treasury jumping to 4.40%, up from 4.15% at the end of the prior week and well above where it resided when the Federal Reserve began its current rate-cutting cycle three months ago.
but the benchmark government bond yield remains low (and supportive of Value stocks) by historical standards,
while history shows that stocks have performed fine in the near term whether the 10-year rate is rising or falling.
The same is true from a historical perspective whether the Fed is easing or tightening monetary policy,
and Jerome H. Powell & Co. is widely expected to trim the target for the Fed Funds rate by another 25 basis points at this week’s FOMC Meeting, though betting in the futures market is now calling for fewer rate cuts in 2025 than in the week prior,
Inflation – Chances Fall of Numerous Fed Rate Cuts in 2025
primarily because inflation at the consumer level (CPI) in November rose 2.7% on a year-over-year basis,
with the Core CPI, which excludes volatile food and energy prices, climbing 3.3%,
and inflation at the wholesale level advancing a higher-than-expected 3.0%.
and inflation at the wholesale level advancing a higher-than-expected 3.0%.
Econ Update – Mixed Numbers but Solid GDP and EPS Growth Still the Forecast
Elsewhere, data on economic growth was mixed last week, with the Small Business Optimism index for November jumping to a much-better-than forecast reading of 101.7, the first time the measure has been above its historical average in some five years,
while there was a pickup to 242,000 in the latest week for first-time filings for unemployment benefits.
Still, the latest estimate from the Atlanta Fed for real (inflation-adjusted) GDP growth in Q4 held steady at a solid 3.3%,
while the outlook for corporate profit growth for 2025 remains healthy.
Not surprisingly, while we must be braced for additional near-term downside, as we know that we must always contend with disconcerting headlines, we see no reason to alter our long-term enthusiasm for equities,…
Seasonality – Most Wonderful Time of the Year
and we note that we continue to reside in the seasonally more-favorable six-month time period,
with November, December and January historically the most wonderful time of the year, on average.
Stock News – Updates on eight stocks across six different sectors
