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 Federal Reserve, Inflation, AAII Sentiment 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
Week In Review – Stocks Advance in Holiday-Shortened Trading
Rates – Yields Drop; Stocks Have Performed Fine, on Average, whether 10-Year Yield is Rising/Falling
Econ Data – Mixed Numbers; Solid GDP Growth Still the Forecast
Inflation – PCE Readings in Line with Expectations
Fed – Odds of Fed Rate Cuts Rise; Stocks have Performed Well, on Average, whether Fed is Tightening/Easing
Seasonality – Most Wonderful Time of the Year
Valuations – Value Stocks Reasonably Priced
Sentiment – More Bears than Bulls
Stock News – Updates on ETN, DLR, SNA, LMT, GM, AMGN, DKS, KSS & JWN
Week In Review – Stocks Advance in Holiday-Shortened Trading
We hope our readers had a great Thanksgiving!
The equity markets in the holiday-shortened trading week continued to provide much about which to be thankful despite a bit of downside volatility. Further illustrating the rewards available to investors who sticks with stocks through thick and thin, many of the broad-based market averages, including the Russell 3000 Value index, closed out the week at all-time highs,
Rates – Yields Drop; Stocks Have Performed Fine, on Average, whether 10-Year Yield is Rising/Falling
while the bond market also joined the party with the yield on the benchmark 10-Year U.S. Treasury dropping to 4.17% from 4.40% the week prior.
Of course, stocks have done well whether the benchmark government bond yield is rising or falling,
but lower yields on competing investments add to the appeal of equities from a valuation perspective,
especially considering that the E part of the Earnings Yield and P/E ratios is likely to continue to show solid growth.
Econ Data – Mixed Numbers; Solid GDP Growth Still the Forecast
And speaking of growth, the second estimate of Q3 real (inflation-adjusted) GDP expansion came in last week as expected at 2.8%,
personal income for October advanced a better-than-expected 0.6%,
and first-time filings for unemployment benefits dipped to 213,000 in the latest week, down from a revised 215,000 the week prior and continuing to reside near multi-generational lows.
As is often the case, the economic data last week were mixed, as sales of new homes in October tallied just 610,000, well below estimates of 725,000,
but pending home sales that month rose a better-than-forecast 2.0% on a month-over-month basis.
Inflation – PCE Readings in Line with Expectations
Consumer spending for October advanced 0.4%, which was in line with expectations, but it was down from a revised 0.6% increase in September,
and consumer confidence, per the Conference Board, rose to a robust reading of 111.7 in October, up from a revised 109.6 the month prior, but the figure was a tick below the consensus projection of 111.8.
The latest estimate for real Q4 GDP growth from the Atlanta Fed inched up to 2.7% last week,
Fed – Odds of Fed Rate Cuts Rise; Stocks have Performed Well, on Average, whether Fed is Tightening/Easing
which would be better than the most recent year-end 2024 projection from the Federal Reserve.
The Fed is a bit closer in its published estimates for inflation as the Core PCE (Personal Consumption Expenditure) price index for October rose 2.8%,
and the full PCE price index (includes the volatile food and energy components) climbed 2.3%.
When all was said and done, the betting odds in the Fed Funds futures market last week saw a reduction in the expected year-end ’24 and ’25 rate to 4.42% and 3.83%, respectively, down from 4.45% and 3.93%, respectively, at the end of the prior week.
Of course, stocks have performed well, on average, even if America’s central bank has been raising interest rates, but we do not mind that equity returns have been stronger, again on average, when the Federal Reserve has been accommodative.
Seasonality – Most Wonderful Time of the Year
We also like that we continue to reside in the seasonally more favorable six months of the year,
with November, December and January the most wonderful three months on average.
Not surprisingly, while we realize that disconcerting headlines are always a wildcard,
Valuations – Value Stocks Reasonably Priced
we remain optimistic about the long-term prospects for our broadly diversified portfolios of what we believe are undervalued stocks,
Sentiment – More Bears than Bulls
and we can add that the contrarian in us liked that the latest gauge of investor sentiment on Main Street saw more Bears than Bulls.
Stock News – Updates on eight stocks across five different sectors
