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 Numbers, Inflation, Interest Rates 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.
Mixed Sentiment – Consumers More Confident; AAII Less Bullish
Econ Numbers – Lower GDP & Higher Jobless Claims
Interest Rates – Yields Move Up and Down
Inflation – PCE As Expected
Earnings – Solid Growth Estimated in ’24 & ’25
Valuations – Inexpensive Multiples for Value Stocks
Volatility – Plenty of Gyrations but Long-Term Trend is Up
Stock News – Updates on six stocks across three different sectors
Mixed Sentiment – Consumers More Confident; AAII Less Bullish
Just when we were getting ready to write about how the Conference Board’s Consumer Confidence measure for May out on Tuesday climbing to 102.0, up from a revised 97.5 in April and well above the 96.0 estimate,
and Wednesday’s edition of The Wall Street Journal publishing a pair of upbeat feature stories (both events arguably a contrarian negative) were triggers for a sizable pullback in the equity markets,
the good folks at the American Association of Individual Investors (AAII) became decidedly less optimistic with the release on Wednesday evening of the latest weekly Investor Sentiment Survey, which showed a big drop in the number of Bulls to 39.0%.
True, history shows that equities have performed fine in the near term, on average, no matter if Main Street investors are excited or depressed about the prospects for stocks,
but the evidence is overwhelming that many make poor market-timing decisions, so all things being equal, we would prefer that pessimism be the predominant emotion.
Econ Numbers – Lower GDP & Higher Jobless Claims
Certainly, with the major market averages residing near all-time highs, it is hard to argue that investors are downbeat, but it is always interesting to try to make sense of short-term market gyrations. After all, the rebound for the overall market on Thursday and Friday was due in large part to a downward revision in Q1 real (inflation-adjusted) GDP growth to 1.3%,
an uptick in the latest initial filings for unemployment benefits to 219,000, versus 216,000 the week prior and the 217,000 estimate,
…and a downgrade of the Atlanta Fed’s Q2 real GDP growth projection to 2.7% from 3.5% a week earlier.
Interest Rates – Yields Move Up and Down
The modestly weaker-than-expected economic stats led to a late-week rebound in government bond prices (drop in yields),
…and kept expectations intact for a Federal Reserve interest rate cut later this year, with the betting for the year-end Fed Funds target ending the week at 4.97%.
Inflation – PCE As Expected
Of course, it didn’t hurt the equity cause that Jerome H. Powell & Co.’s preferred measure of inflation, the Core Personal Consumption Expenditure Index rose 2.8% in April, matching the consensus forecast,
while personal income that month inched up an as-expected 0.3%,
…and personal spending gained 0.2%, slightly below estimates.
To be sure, the data out last week did nothing to change the recession probability of 30% in the next 12 months, as tabulated by Bloomberg,
Earnings – Solid Growth Estimated in ’24 & ’25
…while the outlook for solid corporate profit growth this year and next remains intact,
…with stock prices over time following earnings higher,
…so we see no reason to alter our enthusiasm for the long-term prospects of the reasonably priced (i.e. Value) stocks that we have long championed.
Valuations – Inexpensive Multiples for Value Stocks
As always, we must be braced for downside equity-market volatility, but we can’t forget that history shows there has been even greater upside volatility,
Volatility – Plenty of Gyrations but Long-Term Trend is Up
with disconcerting headlines always eventually giving way to long-term equity market gains.
Stock News – Updates on six stocks across three different sectors
