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 Economic News, Inflation, Corporate Profits and more stock 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.
Newsletter Trades – One Transaction for 4 Portfolios
Week in Review – Value Has 4 Days in the Sun
Econ News – Mixed Numbers
Inflation – In Line PCE
Corporate Profits – Favorable EPS Estimates for ’24 and ’25
Sentiment – Optimism Surges
Stock News – Q1 Winners & Losers
Week in Review – Value Has 4 Days in the Sun
With the median stock in the Russell 3000 index gaining 2.2% and the Russell 3000 Value index (R3KV) outperforming the Russell 3000 Growth index (R3KG) by a wide margin, it was our kind of trading week, even as it was only four days, given the Good Friday holiday.
Of course, we are not surprised that Value would have a little time in the sun, given that the R3KV is as attractively priced relative to the R3KG as at any time since the bursting of the Tech Bubble 24 years ago,
and inexpensively priced stocks are still reasonably priced on an earnings yield and dividend yield basis relative to the 10-Year U.S. Treasury yield.
Interestingly, that benchmark government bond yield was unchanged over the last four trading days,
Econ News – Mixed Numbers
as economic data was mixed, with the Conference Board’s measure of Consumer Confidence edging down to 104.7 in March from a revised 104.8 in February, but below projections of 107.0,
yet the Univ. of Michigan’s Consumer Sentiment gauge for March came in better than expected at 79.4, up from 76.5 the month prior.
New home sales for February at a 662,000 seasonally adjusted annual rate modestly trailed forecasts,
but pending home sales rose 1.6% in February, slightly ahead of estimates.
U.S durable goods orders excluding transportation came in about as expected with a 0.5% increase for February,
as did first-time filings for unemployment benefits in the latest week at 210,000.
We also learned that Q4 real (inflation-adjusted) GDP growth was revised upward to 3.4%,
Inflation – In Line PCE
but the big economic news for the week was released on Friday, when the Federal Reserve’s preferred inflation measure, the Core Personal Consumption Expenditure, for February showed a 2.8% year-over-year increase, in line with projections,
even as personal income for the same month came in a bit lighter than forecast at a 0.3% monthly increase,
and consumer spending was ahead of expectations with a 0.8% monthly gain.
We will have to see how the financial markets react to the Good Friday numbers, and we note that the betting in the futures market for the year-end Fed Funds rate saw an increase to 4.66% last week from 4.48% the week prior,
but it was interesting that the odds of recession in the next 12 months, as tabulated by Bloomberg, fall to 35% last week,
and the most recent projection for Q1 real GDP Growth from the Atlanta Fed inched up to 2.3%,
Corporate Profits – Favorable EPS Estimates for ’24 and ’25
which continues to bode well for the outlook for corporate profits.
Sentiment – Optimism Surges
So, even as we realize that Bullishness on Main Street increased and Bearishness decreased last week on the often-contrarian AAII Sentiment Survey,
we see no reason to alter our enthusiasm for the long-term prospects of our broadly diversified portfolios of what we believe to be undervalued stocks,
Stock News – Updates on eleven stocks across seven different sectors
