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 Valuations, Terrorism, Corporate Profits, Valuations 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
Volatility – The Longer the Measuring Stick the Lower the Chance of Loss
Terrorism – New Orleans Attack Adds to the Disconcerting Event List Stocks Have Overcome
Corporate Profits – Healthy EPS Growth Still the Forecast
Econ Update – Better-than-Expected Numbers, Solid Growth Outlook Intact
Interest Rates – Stocks Have Performed Fine, on Average, No Matter the Direction of Rates
Valuations – Value Stocks Remain Reasonably Priced
Sentiment – AAII Bullishness Retreats
Stock News – Updates on AAPL & TAP & 25 Top TPS Performers in 2024
Volatility – The Longer the Measuring Stick the Lower the Chance of Loss
Happy New Year!
While the latest market week saw stocks gyrate down and up and down and up, only to more or less tread water, with the Russell 3000 Value index virtually unchanged for the four trading days,
showing that volatility (or better yet, the chance of loss) dissipates the longer the holding period,
Terrorism – New Orleans Attack Adds to the Disconcerting Event List Stocks Have Overcome
it was not easy to read the newspapers as terrorism again struck on U.S. soil,
adding to the litany of frightening events with which investors long have had to contend,
on their way to achieving terrific long-term returns,
as well as handsome short- and intermediate-term returns.
Corporate Profits – Healthy EPS Growth Still the Forecast
Certainly, we are not suggesting that developments on the home front and around the world have no impact, but in the fullness of time, equity prices historically have followed corporate profits higher, with sizable and sustained moves lower nearly always coinciding with an earnings retreat.
Econ Update – Better-than-Expected Numbers, Solid Growth Outlook Intact
Happily, the odds of a near-term economic recession, much less an EPS decline, are low today,
with the handful of stats out last week generally topping forecasts, such as pending homes sales for November rising a better-than-expected 2.2% in November vs. October,
first-time filings for unemployment benefits in the latest week coming in at 211,000, below estimates and near multi-generational lows,
and the ISM Manufacturing Index for December climbing to 49.4, up from 48.3 in November and above projections of 48.3, with the ISM folks stating its latest tally corresponds to a change of 1.9% in real (inflation-adjusted) gross domestic product (GDP) growth on an annualized basis.
Solid economic growth, at least for the just-completed Q4, is also what the latest 2.4% real GDP growth estimate from the Atlanta Fed is suggesting,
while the Federal Reserve’s latest forecasts call for 2.1% real GDP growth in 2025.
Interest Rates – Stocks Have Performed Fine, on Average, No Matter the Direction of Rates
Of course, many seem more worried about the pace of additional cuts in the Federal Funds rate from Jerome H. Powell & Co., even as market and Fed expectations seem to be on the same page at present, with a year-end 2025 Fed Funds rate expectation in the 3.9% range.
True, lower interest rates should make already very reasonably priced Value stocks even more attractive,
but decades of market history show that equities have performed fine, on average, whether the Fed is easing or tightening monetary policy,
and it is a similar story in terms of increasing or decreasing government bond yields.
Valuations – Value Stocks Remain Reasonably Priced
Not surprisingly, then, we see no reason to alter our enthusiasm for the long-term prospects of our broadly diversified portfolios of what we believe are undervalued stocks,
especially as we remain in the seasonally more favorable time of the year,
Sentiment – AAII Bullishness Retreats
and concerns about too much enthusiasm for stocks have continued to dampen, with the latest Bull-Bear Sentiment gauge from the American Association of Individual Investors seeing fewer optimists and more pessimists than has been the norm since 1987.
Stock News – Updates on two stocks and the Top 25 Performers 0f 2025
