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 Market Timing, AAII Sentiment, Economic Stats, Earnings 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.
Newsletter Trades – 6 Buys for 4 Portfolios
Week in Review – May Rebound Gathers Steam
Market Timing – Only Problem is Getting the Timing Right
Sentiment – Selling Lower & Buying Higher Often Par for the Course
Historical Evidence – Facts over Fiction
Econ Stats – A Couple of Weak Numbers but Q2 GDP Looking Good
Volatility – Ups and Downs But Long-Term Trend is Up
Earnings – Solid Growth Estimated in ’24 & ’25
Valuations – Inexpensive Metrics for Our Portfolios
Stock News – Updates on ten stocks across eight different sectors.
Market Timing – Only Problem is Getting the Timing Right
With data provider DALBAR’s just-released 2023 Quantitative Analysis of Investor Behavior report again confirming that fixed income mutual fund investors are horrific market timers (they should have kept their money in the mattress!), while equity mutual fund investors aren’t a whole lot better, illustrating that many should have zigged when they instead zagged,
Sentiment – Selling Lower & Buying Higher Often Par for the Course
we suppose we shouldn’t be surprised that stocks gained ground all five days last week, capping the second straight up week since the American Association of Individual Investors (AAII) weekly Investor Sentiment Survey saw more pessimists than optimists!
And while those same folks two weeks ago somehow thought equities were less desirable AFTER they had gone down and they are a better buy now AFTER they have gone up, it is comforting to know that stocks have advanced in the short run, on average, no matter the AAII Bull-Bear Spread.
Historical Evidence – Facts over Fiction
No doubt, some of the worry during April was due to the Wall Street saying, Sell in May and Go Away, but nearly a century of market history suggests that bailing out of stocks on the basis of the calendar, on average, would be hazardous to investor wealth,
which is the same thing the data confirm when supposed experts tell us that rising interest rates are bad for stocks,
when the only thing that can be said with any certainty is that higher yields in the long run are bad for…bonds.
Of course, we understand that traders focus mightily on interest rates with stability in the 10-Year U.S. Treasury yield evidently contributing to stock gains last week,
even as the benchmark government bond yield continues to reside well below the 5.82% average since the launch of The Prudent Speculator more than 47 years ago.
True, many are fixated on the Federal Reserve and if/when the first cut in the Fed Funds rate will materialize, but it is interesting that the betting odds in the futures market are now targeting a year-end 2024 Fed Funds rate of 4.92%, up from 4.87% a week ago,
as long-run inflation expectations ticked higher last week.
Econ Stats – A Couple of Weak Numbers but Q2 GDP Looking Good
On the other side of the coin, some may have been relieved that the slow economic news week saw weaker-than-expected numbers with first time filings for jobless benefits jumping to 231,000 in the latest week, up from a revised 209,000 the week prior,
and Consumer Sentiment from the Univ. of Michigan sinking to a reading of 67.4, well below estimates of 76.2.
However, despite those big misses, the odds of recession, as calculated by data provider Bloomberg, held steady at 30%,
and the latest forecast from the Atlanta Fed for real (inflation-adjusted) Q2 GDP growth climbed to a very robust 4.2%.
Volatility – Ups and Downs But Long-Term Trend is Up
To be sure, anything can happen in the financial markets as we move forward, while we respect that media headlines are disconcerting (this seemingly often has been the case),
so we continue to be braced for downside volatility as trips south in the equity markets are still events that must be endured on the way to terrific long-term investment returns.
Earnings – Solid Growth Estimated in ’24 & ’25
However, given that the brand of equities (Value) that we have long championed remain attractively priced, with reasonable P/E ratios on average,
and we think the E part of that equation is likely to grow this year and next,
with the P part of the equation following that EPS growth over time,
Valuations – Inexpensive Metrics for Our Portfolios
we can’t help but be sanguine about the prospects for our broadly diversified portfolios of what we believe are even more undervalued stocks.
Stock News – Updates on ten stocks across eight different sectors
