market commentary

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,

Economic Numbers

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,

Economic Numbers

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%.

AAII

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,

AAII Sentiment

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.

QAIB Study


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%,

GDP

an uptick in the latest initial filings for unemployment benefits to 219,000, versus 216,000 the week prior and the 217,000 estimate,

Economic Numbers

…and a downgrade of the Atlanta Fed’s Q2 real GDP growth projection to 2.7% from 3.5% a week earlier.

Economic Numbers


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),

Interest Rates

…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%.

Interest Rates


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,

Inflation

while personal income that month inched up an as-expected 0.3%,

Inflation

…and personal spending gained 0.2%, slightly below estimates.

Inflation

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,

Earnings

…with stock prices over time following earnings higher,

Earnings

…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.

Volatility


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,

Long- Term Returns


Volatility – Plenty of Gyrations but Long-Term Trend is Up

with disconcerting headlines always eventually giving way to long-term equity market gains.

Volatility

 


Stock News – Updates on six stocks across three 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.
Kovitz Investment Group Partners, LLC (“Kovitz”) is an investment adviser registered with the Securities and Exchange Commission. This report should only be considered as a tool in any investment decision and should not be used by itself to make investment decisions. Opinions expressed are only our current opinions or our opinions on the posting date. Any graphs, data, or information in this publication are considered reliably sourced, but no representation is made that it is accurate or complete and should not be relied upon as such. This information is subject to change without notice at any time, based on market and other conditions. Past performance is not indicative of future results, which may vary.