Volatility, Inflation, Earnings and More Stock News

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 Volatility, Inflation, Earnings and More Stock News. 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 – Sizable Pullback

Volatility – Ups & Downs are Normal but Long-Term Trend has been Higher

Inflation – PCE Disappoints; Historical Perspective

Fed – No Rate Cut; Historical Perspective

Econ News – Weak Jobs Numbers, but Growth Still the Forecast

EPS – Solid Corporate Profit Growth in 2025 and 2026 Remains the Expectation

Valuations – Attractive Metrics for Value Indexes and our Portfolios

Patience – The Longer the Hold, the Less the Change of Poor Returns

Stock News – Updates on WM, PHG, UPS, GLW, NSC, STX, PPG, FDP, QCOM, PRU, SNY, IP, FSLR, AAPL & AXAHY

Week in Review – Sizable Pullback

Given that more or less it had been straight up since the April 8 market lows, the sizable pullback last week in the 2% to 3% range for the equity markets offered a reminder that moves south are always part of the investment landscape,

Volatility – Ups & Downs are Normal but Long-Term Trend has been Higher

with larger 5% declines happening three times per year on average,

and 10% corrections tasking place with surprising frequency

and the tally of official 20% Bear Markets since 1927 standing at 27,

which doesn’t even count this year’s Liberation Day unofficial Bear Market carnage.

Happily, despite the sometimes-scary downturns along the way and the disconcerting headlines that often come with that red ink, stocks have always proved rewarding in the fullness of time.

This has been the case, whether the headwinds are related to tariffs championed by President Trump,

as levies of some sort have been around for more than a century,

or whether there has been some other frightening event on the global stage.

Inflation – PCE Disappoints; Historical Perspective

This has also been true, on average over concurrent and subsequent three-, six- and 12-month periods, whether inflation (the Federal Reserve’s preferred measure, the core personal consumption expenditures price index, edged up in July to 2.8%),

is rising or falling,

Fed – No Rate Cut; Historical Perspective

with equities proving to be a great hedge during the Great Inflation more than four decades ago.

Of course, history is merely a guide and not the gospel, but we also know that stocks have done well in the intermediate term, on average, whether the Fed is easing or tightening monetary policy,

even as there is often plenty of volatility around those decisions on interest rates.

Speaking of which, last week’s stock swoon was arguably triggered by Jerome H. Powell & Co.’s decision to leave the target for the Fed Funds rate unchanged at an upper bound of 4.5%,

with the Chair at his Press Conference suggesting the FOMC is more concerned with the price stability side of its dual mandate as opposed to maximizing employment.

We shall see if that mindset soon shifts as longer-term inflation expectations, per the latest Univ. of Michigan Sentiment Survey, pulled back to a lower-than-expected 3.4% in July,

Econ News – Weak Jobs Numbers, but Growth Still the Forecast

…and the monthly jobs report came in weaker than expected with only 73,000 new nonfarm payrolls added last month and substantial downward revisions made to the tallies for the two prior months.

True, the unemployment rate ticked up to 4.2%,

…but first-time filings for jobless benefits held steady in the latest week at a very-low figure of 218,000.

No doubt, the strength of the economy is the big question mark, but real (inflation-adjusted) U.S. GDP growth increased a better-than-projected 3.0% in Q2,

and the initial estimate for real GDP growth for Q3 from the Atlanta Fed stood at a solid 2.1%,…

while the International Monetary Fund last week was out with upward revisions for its U.S. and global GDP forecasts versus its downbeat April guestimates.

EPS – Solid Corporate Profit Growth in 2025 and 2026 Remains the Expectation

We continue to think a decent economic backdrop will be supportive of corporate profits and we note that Q2 earnings reporting season thus far has seen more than the usual number of companies beat expectations. Yes, forward guidance has been typically cautious, but estimates still call for solid growth this year and next and history suggests that it has usually taken a decline in EPS to produce a sustained downturn in stock prices.

Valuations – Attractive Metrics for Value Indexes and our Portfolios

To be sure, we are braced for additional selling in the near term, and we wouldn’t mind the creation of more long-term buying opportunities as we have some dry powder available in our portfolios, but we continue to think that valuations on the Value indexes are very reasonable,

especially with it looking increasingly likely that the Fed will soon lower interest rates,

while we sleep well at night with the inexpensive price metrics and generous dividend yields for our broadly diversified portfolios of what we think are undervalued stocks

Patience – The Longer the Hold, the Less the Change of Poor Returns

as know the longer Value Stocks and Dividend Payers are held the lower the chance of a return below that of the current risk-free rate!

Stock News – Updates on fifteen stocks across ten 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.