Recessions, Valuations, Economic News 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 Recessions, Valuations, Economic News 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

Buckingham Appearances – Miami Moneyshow Masters Symposium & San Diego AAII

Week – Modest Rebound from S&P Correction Territory

Volatility – Stocks Go Up and Down in the Short Term, But Have Provided Handsome Rewards in the Long-Term

Patience – The Longer the Hold the Better the Chance of Success

Sentiment – Major AAII…and Univ. of Michigan Contrarian Buy Signal

Econ News – Powell Update, Solid Hard Data Points & GDP Growth Still the Forecast

Recessions – Risk Isn’t High Today, But History Shows Staying the Course the Right Move Even if a Contraction Eventually Was to Occur

Valuations – Liking the Metrics on our Portfolios

Stock News – Updates on ten stocks across seven different sectors

Buckingham Appearances – Miami Moneyshow Masters Symposium & San Diego AAII

Your editor will be speaking at the Moneyshow Masters Symposium in Miami on May 16, 2025. Click on the link for Registration information. I also will be speaking in San Diego on Saturday, April 12, 2025, at 9:00 AM. Registration info for that presentation is available here:
Upcoming Chapter Events – AAII San Diego

Week – Modest Rebound from S&P Correction Territory

One week of a relatively modest rebound for the equity markets hardly a trend makes and it remains to be seen whether the March 13, 2025, lows will mark the nadir for the 39th correction since the launch of The Prudent Speculator 48 years ago this month,

but history shows that every previous selloff of 10% or more has been followed by a rally of even greater magnitude, with the average gain in the periods in the green dwarfing the average loss during the times in the red, whether it is since 1977 or going all the way back to 1927.

Volatility – Stocks Go Up and Down in the Short Term, But Have Provided Handsome Rewards in the Long-Term

Of course, no matter what the evidence shows, be it for intermediate and long-term equity returns and major events in Russia-U.S. history,

or disconcerting news on the domestic and/or global stages,

Patience – The Longer the Hold the Better the Chance of Success

we know that there will always be folks who forget legendary investor Charlie Munger’s admonition, “The first rule of compounding. Never interrupt it unnecessarily,” with the media not helping to keep them on track with their long-term investment plans.

Sadly, we live in a polarized world politically and social media, along with 24/7 Breaking News headlines, makes it more difficult to stay on course, but the 43-year-old discussed in the chart above who has headed for the hills with her retirement assets is ignoring what the historical odds overwhelmingly suggest should be the right decision today for someone who arguably has a 20-year-plus investment time horizon.

Sentiment – Major AAII…and Univ. of Michigan Contrarian Buy Signal

We realize that it is not always easy keep the faith that equities will prove rewarding in the fullness of time as fear is a powerful emotion, but it is stunning to see how pessimistic the folks on Main Street are saying they are today. Incredibly, we have now seen four straight extremely Bearish weekly readings on the American Association of Individual Investors (AAII) Sentiment Survey.

Happily, given that AAII has long proved to be a reliable contraindicator, the data show that investors should be greedy when others are fearful,

and very greedy when others are very fearful,

especially considering that AAII sentiment readings are today on par or even more pessimistic than at Great Financial Crisis and COVID-19 market bottoms.

And it isn’t just AAII that is flashing a contrarian equity market buy signal, as we recently saw a big plunge in the University of Michigan’s Consumer Sentiment Survey, which has reached a low level that heretofore has led to significantly positive returns for stocks going forward.

Econ News – Powell Update, Solid Hard Data Points & GDP Growth Still the Forecast

We respect that uncertainty related to the Trump tariffs is causing plenty of consternation, even as the equity markets have moved nicely higher despite dealing with the issue for more than 7 years,

We respect that uncertainty related to the Trump tariffs is causing plenty of consternation, even as the equity markets have moved nicely higher despite dealing with the issue for more than 7 years,

Many of the economic statistics out last week supported the Fed Chair’s assertion as retail sales excluding automobiles and gasoline rebounded 0.5% in February, ahead of expectations and up sharply from a revised 0.8% drop in January,

housing starts for February jumped to a seasonally adjusted run rate of 1.501 million, well ahead of estimates of 1.385 million and up from a revised 1.35 million the month prior,

existing home sales edged up to a 4.26 million seasonally adjusted rate, well above projections and above the 4.09 million tally for January,

first-time filings for unemployment benefits held steady in the latest week at a historically low 223,000,

and the Philadelphia Fed gauge of East Coast manufacturing beat estimates by more than 3 points, coming in at 12.5 for March.

To be sure, the outlook for economic growth has weakened somewhat, with the latest projection from the Atlanta Fed for Q1 real (inflation-adjusted) U.S. GDP growth showing a contraction of 1.8%,

but the latest projections out last week from the Federal Reserve Board members and Federal Reserve Bank presidents predict a real U.S. GDP expansion (yes, expansion) this year and next of 1.7% and 1.8%, respectively, down from prior estimates of 2.1% for 2025 and 2.0% for 2026,

with the downwardly revised projections out earlier last week from the The Organization for Economic Co-operation and Development (OECD) also calling for real U.S. GDP growth this year and next,

and even the relatively pessimistic Leading Economic Index from the Conference Board suggesting growth of “around 2.0% in 2025.”

No doubt, economic prognostication is fraught with peril, but the Federal Reserve consistently reminds in its FOMC Statements, “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals,”

with the futures market betting that there will be as many as three cuts in the Fed Funds rate this year,

moving the benchmark central bank lending rate down from its current upper bound of 4.5%.

Recessions – Risk Isn’t High Today, But History Shows Staying the Course the Right Move Even if a Contraction Eventually Was to Occur

While the odds of recession remain relatively low,

and the outlook for corporate profit growth this year and next continues to be solid,

we understand that contractions are part of the economic process, so we continue to take comfort in what the historical return figures show about equity performance and recessions, especially as even those whose job it is to arbitrate the start and end of those events don’t know for sure until well after the fact.

Valuations – Liking the Metrics on our Portfolios

So, while we continue to be braced for downside volatility, we remain very comfortable with the reasonable valuation metrics on our broadly diversified portfolios of what we believe are undervalued stocks.

Stock News – Updates on ten stocks across seven 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.