Economic Outlook, Interest Rates, Dividends and More

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 Economic Outlook, Interest Rates, Dividends 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

Market of Stocks – Dow Down 527 Points, But Average Stock Up on Thursday

Econ Outlook – GDP Slowing, But Modest Growth Still Forecast

Interest Rates – Not Fast Enough, Per the White House, but 3 to 4 Cuts in the Fed Funds Rate Expected in 2025

Recessions – Risk Has Jumped, But History Shows Staying the Course the Right Move Even if a Contraction Were to Occur

Volatility – Stocks have Appreciated Handsomely in the Fullness of Time, Despite Corrections, Bear Markets and Numerous Disconcerting Events Along the Way

Dividends – Rising Payouts Over Time; 25 Recent TPS Dividend Hikers

Patience – Time is the Friend of the Long-Term Investor

Stock News – Semis and Eleven Stocks from Eight Different Sectors

Market of Stocks – Dow Down 527 Points, But Average Stock Up on Thursday

We have often mentioned that it is a market of stocks and not simply a stock market, with action in 2025 illustrating the point. Even though the capitalization-weighted benchmark itself is off 10.25% year-to-date, the average stock in the broad-based Russell 3000 index has endured a 15.33% negative return since the start of the year, which is about what the small-cap Russell 2000 index is down.

Of course, return figures going back more than 97 years show that the proverbial soldiers, as represented by small-company stocks, historically have outperformed the generals over the long term, even as Value Stocks, (large and small) have won the overall spoils.

While it seldom is as dramatic, the soldiers had a day in the sun in Thursday’s trading on April 17, 2025. Believe it or not, the average stock in the Russell 3000 index gained an impressive 1.20% on the day, even as the price-weighted Dow Jones Industrial Average plunged 527 points, or 1.33%. Incredibly, a $131 plummet in price for UnitedHealth accounted for 805 points of the Dow loss.

Unlike benchmarks that weight stocks based on their market capitalization, the Dow is an antiquated gauge that simply adds up the prices of each of its 30 components and divides the total by a divisor (currently 0.162684). With each $1 move in a stock price accounting for 6.15 Dow points, high-priced stocks like Goldman Sachs and United Health are far more important than lower-priced stocks like Apple, Amazon.com and Nvidia, despite those Magnificent 7 members dwarfing the first two in terms of market capitalization. In fact, 20 of the Dow components were up on Thursday, versus nine that were down and one that was unchanged.

Econ Outlook – GDP Slowing, But Modest Growth Still Forecast

Though Thursday was a good day overall, it was another volatile week for equities as developments on the tariff front continued to drive near-term market moves,

with the biggest news arguably emanating from a speech and Q&A session with Jerome H. Powell at the Economic Club of Chicago. In the prepared remarks, the Federal Reserve Chair offered his Economic Outlook, which was basically unchanged from what he said two weeks prior.

The takeaways were that recent economic data suggests the economy has been slowing, given negative readings for April on the forward-looking Empire State gauge of factory activity in the New York area,

and the Philadelphia Fed’s survey of East Coast manufacturing activity,

in addition to subdued readings this month on homebuilder sentiment,

and weaker-than-expected housing starts numbers for March.

On the other hand, consumer spending has remained solid, with retail sales excluding automobiles and gasoline, rising a better-than-forecast 0.8% in March,

and the jobs picture continues to be solid with first-time filings for unemployment benefits for the week ending April 12 coming in below forecasts at 215,000, a figure that is still near multi-generational lows.

Interest Rates – Not Fast Enough, Per the White House, but 3 to 4 Cuts in the Fed Funds Rate Expected in 2025

To be sure, even though he said something similar two weeks ago, the part of the Powell speech that garnered the most attention was this portion,…

Looking forward, the new Administration is in the process of implementing substantial policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. Those policies are still evolving, and their effects on the economy remain highly uncertain. As we learn more, we will continue to update our assessment. The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth. Both survey- and market-based measures of near-term inflation expectations have moved up significantly, with survey participants pointing to tariffs. Survey measures of longer-term inflation expectations, for the most part, appear to remain well anchored; market-based breakevens continue to run close to 2 percent.

…especially as President Trump posted the next day on Truth Social…

The ECB is expected to cut interest rates for the 7th time, and yet, “Too Late” Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete “mess!” Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS. Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now. Powell’s termination cannot come fast enough!

Some share the Commander in Chief’s view that the Federal Reserve is behind the curve, given that growth in both the Consumer Price Index (CPI) and Producer Price Index (PPI) came in below expectations last month, suggesting that inflation was trending in the right direction. Still, the betting in the futures market continues to suggest that Powell & Co. will reduce interest rates by three to four 25-basis-point increments this year, with the year-end Fed Funds rate projected to be 3.46%, down from today’s implied rate of 4.33%.

Time will tell whether a Fed move to lower rates will prove too late to support the economy, but history suggests that an accommodative Fed is favorable for equity prices,

Recessions – Risk Has Jumped, But History Shows Staying the Course the Right Move Even if a Contraction Were to Occur

while the International Monetary Fund said on Thursday, “Our new growth projections will include notable markdowns, but not recession,” and economists surveyed by The Wall Street Journal are still projecting modest growth this year,

which is the same view as the Blue Chip consensus, even as the Atlanta Fed’s latest projection for real (inflation-adjusted) GDP growth in Q1 is -2.2%.

Volatility – Stocks have Appreciated Handsomely in the Fullness of Time, Despite Corrections, Bear Markets and Numerous Disconcerting Events Along the Way

No doubt, the U.S. economy could see negative real GDP growth in the near term, but we note that the Bear Market endured by the average stock this year,

saw stocks already fall far more than has been the norm during prior economic contractions,

despite the outlook for corporate profit growth remaining upbeat,

while we can’t forget how lucrative the rallies have been, on average, coming out of recessions.

Certainly, continued significant share-price volatility must be expected in the near term, though downside gyrations have long been a normal part of the investment process,

with this now the 39th correction of 10% or greater without an advance of comparable magnitude since the launch of The Prudent Speculator in 1977,

but despite 27 Bear Markets since 1927 where stocks lost 20% or more on a closing basis, the long-term trend in equities has been higher

with all prior disconcerting events overcome in the fullness of time,

and our focus always on the reasonable valuations and generous dividend yields associated with our broadly diversified portfolios of what we believe are undervalued stocks.

Dividends – Rising Payouts Over Time; 25 Recent TPS Dividend Hikers

And speaking of dividends, we continue to be comforted that payouts on our portfolios generally have risen over time,

with 25 of our stocks boosting their dividends over the last three months

Patience – Time is the Friend of the Long-Term Investor

while we like that the longer Dividend Paying stocks have been held the less the chance of a lower return than the risk-free rate presently offered by U.S. Treasuries.

Stock News – Semis and Eleven Stocks from Eight 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.