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Second Quarter Commentary 2023

Hello from Sycamore,

Performance and the Markets

So far so good for 2023. Since the markets found a low point last fall, they have been steadily climbing. We are not back to the highs that we experienced at the end of 2021, but with the Dow Jones industrial average at about 34,000 now, we’re within shouting distance. From June 30th, 2022, our growth and income composite have gained more than 19%. We are pleased with these returns. We are also pleased that the pending recession – which according to many news outlets, has been just around the corner for about the last 18 months – still seems to be around that corner! That’s not to say that it isn’t coming, forecasting can be difficult. As Yogi Berra said, “It’s tough to make predictions, especially about the future”.

Because we do our own research and make individual stock selections for your portfolio(s), we are constantly evaluating several hundred individual securities based on their assets and profitability. Nothing is assured, but currently, we see most securities that we follow as being ‘reasonably’ priced. While we do not expect our composite to gain another 9% during the last half of 2023, we are comfortable with current valuations. We believe that in the long run share prices will follow the profitability of the company. With a few exceptions, the profits of the companies that we follow are progressing as we would expect.

The Economy

We recently received good news on the inflation front. The current annual rate has dropped to 3%, which is the lowest rate in more than two years. The federal reserve has recently slowed the pace of interest rate hikes, and they have indicated that one or two more .25% hikes will likely be all we’ll see in the near future. We feel the recent inflation news shows the rate hikes over the last year have been effective.

Producer prices, which at their peak in 2021 and 2022 were growing at nearly a 23% annualized rate, are now declining at about a 6% annualized rate. Generally, the producer price index is a good indicator of what to expect from the consumer price index. If history holds true, we could expect inflation to continue to subside.

In our March letter to you, we mentioned that the money supply in the economy (M2) was decreasing. That is still the case. This is another metric that leads us to believe inflation will continue to ease. The economy continues to create new jobs at a brisk pace and has created 1.67 million new jobs so far in 2023. The unemployment rate now stands at 3.6%.

We recently received good news about our first quarter gross domestic product (GDP). The estimate was revised up by .7% to 2%. It seems consumers are getting used to higher interest rates and sales of existing homes have bounced back a little while housing starts are showing signs of getting back on track.

Not everything is perfect, but the recent data showing the economy is growing more than expected and inflation is cooling faster than expected is not a bad combination. We’re optimistic.

Purchase and Sale Activity During Q-2

The second quarter had more activity than usual for our portfolios.

We bought Lincoln National, Bread Financial, Canadian Solar, Mednax Inc., Wintrust Financial, Generac Holdings, Verizon, M.D.C. Holdings, and Petmed Express.

We sold Neogen, Warner Brothers Discovery, Kaman, Organon & Co, ASGN Inc, China Automotive, New Orient Education, Consensus Cloud Solutions, Mueller IND, and Ziff Davis.

As always, do not hesitate to reach out to our offices at (765) 455-1554 to discuss this.

Thank you for your continued trust and support,

Sycamore Financial Group

*Data not audited
*Results reported gross fees
**Past performance does not assure future results. Investors cannot invest directly in the stock market indexes such as the S&P 500. Investment return and principal value of an investment will fluctuate. Investor value, when sold may be worth more or less than their original cost.

By Sycamore Financial Group|2023-07-22T01:38:42-04:00July 22nd, 2023|2023 Newsletters|0 Comments

Performance, Markets and The Economy

Hello from Sycamore,

Performance and the Markets

Our Growth and Income Composite gained just a bit less than 0.5% over the past year (gross of all fees). This is significantly better than the -7.7% by the S&P 500. Historically our strength has been to hold value better during market declines and it seems to be true again during this market cycle. We still expect the markets to do reasonably well in 2023. We know that there is a lot of concern about a pending recession, but we’ve now been hearing that for more than a year and we’ve not seen it yet.

As you already know, we do our own research and analysis to make security selections rather than send your money to a 3rd party manager or mutual fund to be managed. This means that we are ‘in the weeds’ each-and-every week. Currently, we see most companies growing earnings at a rate we’d normally expect. Of course, there are exceptions, but on the whole, we are still finding many bargains and we’re looking forward to an uneventful 2023.

The Economy

One of the primary reasons that we are in a higher interest rate environment is inflation. It continues to be a problem and the Federal Reserve is continuing to raise interest rates – although the rate of increase seems to be slowing and we believe we are near the top for now. Producer prices continue to drop, and we’ve found that the Consumer Price Index tends to follow. We’re hopeful that inflation will ease significantly this year. Also, the amount of money in our economy (M-2) is now shrinking. We believe that this will slow the inflation rate. Many economic indicators are performing well. Retail sales continue to be strong, and the consumer is a very large part of our economy. The unemployment rate remains at near record lows and our economy continues to create new jobs at a very good rate. New orders for durable goods are strong and even sales of existing homes and new starts are staging a nice recovery. We remain optimistic overall, and we believe that most companies can operate profitably in our current economic environment.

Purchase and Sale Activity During Q-1

During the 1st quarter of 2023, we bought Generac (GNRC), Paychecks (PAYX), IBM, ASGN, and ADP. We sold Sally Beauty (SBH).

As always, do not hesitate to reach out to our offices at (765) 455-1554 to discuss this.

Thank you for your continued trust and support,

Sycamore Financial Group

By Sycamore Financial Group|2023-04-26T22:13:02-04:00April 26th, 2023|2023 Newsletters|0 Comments

Consider Reviewing Your Insurance Package

Hello from Sycamore,

Insurance is a way to transfer risk from you to a larger group of people through a firm, the insurance company. For example, many people choose to insure against potentially bad outcomes that could be catastrophic like the death of the family earner in the case of life insurance or large unexpected medical expense through medical insurance. On the other hand, you may not choose to have collision or “full coverage” insurance on your $3,000 extra vehicle. Assuming a collision in which you walk away just fine but the car is totaled, the $3,000 loss may be something you can live with.

There are many forms of insurance: life, medical, homeowners, auto, disability, malpractice, and many more. All insurance has a time and a place. For example, we often review what, if any, life insurance you may have during our annual reviews. Life insurance can be a handy tool that you purchase when you need it but at times, we find that there are still policies in force that may not be needed anymore. On the other hand, we sometimes see situations where people are not insured to the extent that possibly they should be in areas like long-term disability or personal liability insurance.

Having the necessary insurance for your individual circumstances can be an integral part of your overall financial plan. It’s important to meet with your insurance agent periodically to review your overall insurance package to see where you may be over or under-insured. Of course, we would be happy to give you some general insurance guidance as well if you have any questions as you review your coverage.

As always, do not hesitate to reach out to our offices at (765) 455-1554 to discuss this.

Thank you for your continued trust and support,

Sycamore Financial Group

***This article is distributed for general informational and educational purposes and is not intended to constitute legal, tax, accounting, or investment advice.***

By Sycamore Financial Group|2023-02-14T01:21:22-05:00February 14th, 2023|2023 Newsletters|0 Comments

Contribution Limits Changing

Hello from Sycamore,

Retirement and health savings plan contribution limits will be changing for the upcoming year. Here is an overview of what you need to know:

401(k), 403(b), 401(a), 457, and federal government Thrift Savings Plans contribution limits will be increased by almost 10% to $22,500.
a. Catch-up contributions for those aged 50 and over will be increased to $7,500 making the total contribution limit $30,000 for the year.
IRA contribution limits will be $500 higher and moved to $6,500.
a. Catch-up contributions for those aged 50 and over will remain the same at $1,000 making the total contribution limit $7,500 for the year.
SIMPLE IRA contribution limits will be raised by $1,500 to $15,500.
a. Catch-up contributions for those aged 50 and over will be increased to $3,500 making the total contribution limit $19,000 for the year.
SEP IRA contribution limits will be moved up to $66,000.
a. SEP IRAs do not allow for catch-up contributions.
Health savings account contribution limits will be higher at $3,850 for individuals and $7,750 for families.
a. Catch-up contributions for those aged 55 and over will remain the same at $1,000 making the total contribution limit $4,850 and $8,750 for the year

We encourage you to forward this email or share this information with anybody that you feel it could benefit. And as always, do not hesitate to reach out with any questions or concerns.

As always, never hesitate to contact us with any questions or concerns.

Thank you for your continued trust and support,

Sycamore Financial Group

***This article is distributed for general informational and educational purposes and is not intended to constitute legal, tax, accounting, or investment advice.***

By Sycamore Financial Group|2023-04-26T22:14:42-04:00November 18th, 2022|2022 Newsletters|0 Comments

How Does Inflation Impact My Savings

Hello from Sycamore,

Inflation is a topic that we’re all hearing about lately. The Federal Reserve Bank (the Fed) has started to raise interest rates to help fight our current inflation. The Fed has a long-term inflation target of 2.0%. To simplify, this means that if a Coca-Cola costs you $1.00 today, then next year that same soda should cost you $1.02. When looking at the effect of inflation for a single year it seems insignificant, let’s look at the longer-term effects. Assume you have $100,000 sitting in cash earning no interest, what will this buy you 15 years from now assuming an average inflation rate of 2.0% each year? It would have a buying power of about $74,082 in today’s dollars. In other words, nearly a 25% reduction in purchasing power due to inflation. While your savings account balance is not declining, the amount of goods and services your money can buy, or your purchasing power, is reduced.

During your annual meetings, we update your financial plans and typically discuss your cash on hand and your emergency fund. This is a different number for everyone but typically somewhere between 3-6 months of living expenses is a good rule of thumb. Also, at different stages of your life, the number that’s right for you may change based on your situation and is a number that also coincides with your risk tolerance. The best number is the one that helps you sleep at night.

How can you lessen the impact of inflation? Our best advice is to keep your emergency fund such as a savings account or money market fund in a low-risk account that earns a competitive yield (several are yielding about 2% today). Then, to build wealth over the long term, try to maintain a well-diversified portfolio of various financial assets that have the potential to grow at a rate greater than inflation.

As always, never hesitate to contact us with any questions or concerns.

Thank you for your continued trust and support,

Sycamore Financial Group

***This article is distributed for general informational and educational purposes and is not intended to constitute legal, tax, accounting, or investment advice.***

By Sycamore Financial Group|2022-09-16T00:31:32-04:00September 14th, 2022|2022 Newsletters|0 Comments

Volatile and Unpredictable

Hello from Sycamore,

As I write this post, the market is down ~10% from its recent high. The beginning of 2022 has been a bit volatile and unpredictable. When we read the news, we see headlines that stop us in our tracks: Inflation, War, Stagflation, Market Correction, Possible Recession.

Realistically, most news these days is created to grab our attention, pull us in. Reporting tends to be negative because negative news sells. It brings people back; it gets more people to click on the headlines. Media is a for-profit industry.

The volatility you are seeing is real. Inflation is normal. Market corrections are normal. Recessions are normal. We are not saying these feel good, or we need to be excited about them, but they are a normal course of business. The market has performed better than expected for the past 12 years – except for a flash recession in 2020. It is not surprising that as we enter the endemic phase of the pandemic and Russia invades Ukraine we might see some volatility.

Here are some facts:

Unemployment is down from its high of ~14.7% in 2020 and currently is at 3.8%.
Wages have been increasing more rapidly than prices. The average income for the bottom 50% of wage earners in the US were up over 11% in 2021.
In 1973 when Craig began in the industry the Dow Jones was just over 500 and today (3/9/22) it’s over 33,000.

From our research, the economy and corporate America appear to be in good shape. We still believe that the best course of action is to stay the course.

Thank you for your business and trust,

Sycamore Financial Group

***This article is distributed for general informational and educational purposes and is not intended to constitute legal, tax, accounting, or investment advice.***

By Sycamore Financial Group|2022-07-21T12:30:07-04:00March 10th, 2022|2022 Newsletters|0 Comments

Thoughts on the Economy

Hello from Sycamore,

COVID-19 has been a shock to our economy and our lives. As a result, the Federal Reserve Bank had to implement swift and significant monetary policy changes. During the onset of the pandemic (March/April 2020), there were worldwide shutdowns that caused many to lose their jobs, miss paychecks that were necessary to pay bills, and companies shuttered. The Fed knew that they needed to take an approach that would spur the economy as much as possible as the country started to reopen. They did this by reducing the reserve requirements for depository institutions, they bought bonds in the open market, and they reduced the interest rate to nearly zero. All these measures made the economy flush with cash, borrowing cheap, and saving not lucrative.

The extra cash that these changes have generated has spurred inflation, but inflation is not always a bad thing. The Federal Reserve has a long-term target inflation rate of 2%. The right amount of inflation in a stable economy can influence expansion. While ongoing inflation issues are certainly possible short-term, we think prolonged inflation or hyperinflation seems unlikely.

If inflation would persist, however, there are a few ways that the Fed can help slow economic activity. These are through changing reserve requirements at depository institutions, open market operations, and setting the discount rate.

Reserve requirements refer to how much of a bank’s total deposits must be kept at the bank at the close of business every day. For example, if a bank has just $500 in deposits and the reserve requirements were 10% then they would only be able to loan out $450. Changing the requirement changes the money supply.
Open market operations are when the Fed either buys or sells government securities in the open market. If they sell securities, they are removing money from the economy by exchanging securities for cash. If they buy securities, they are adding money to the economy by exchanging cash for securities.
The discount rate is the rate that the Federal Reserve would pay to banks for depositing funds with the Fed overnight. This effectively sets a floor on the interest rate and the rate trickles down and influences other interest rates on loans such as car loans, personal loans, mortgages, business loans, etc.

All these measures can be used in different proportions to influence the economy and at various times or simultaneously.

Thank you for your business and trust,

Sycamore Financial Group

***This article is distributed for general informational and educational purposes and is not intended to constitute legal, tax, accounting, or investment advice.***

By Sycamore Financial Group|2022-07-21T12:29:41-04:00February 14th, 2022|2022 Newsletters|0 Comments

Doing Our Part for the Community

Hello from Sycamore,

We are pleased to announce that Sycamore Financial Group is now carbon-neutral, powered by renewable energy, and supports efforts to restore damaged freshwater sources.

We worked with Bonneville Environmental Foundation (BEF) to help us calculate and balance the environmental footprint we create. There are three main categories where we create an environmental impact: carbon emissions, water usage, and energy usage. We need to consume some resources to operate, and we cannot directly restore what we use, partnering with an organization that can fund these restoration projects at a large scale was necessary.

Through the purchase of Green-e Energy Certified Renewable Energy Certificates (RECs), we have ensured that our electricity use comes from renewable resources. Verified Carbon Offsets purchases have balanced the greenhouse gas emissions associated with all of our office locations, employee commutes, and business travel. Water Restoration Certificates® purchases have restored water to critically dewatered rivers and streams equivalent to at least the annual water consumption at our office locations.

All of us rely on Earth to survive and there is no planet B, we feel it is vital to help do our part for the community at large. We believe that helping take care of our fellow neighbors and the world that we depend on will help ensure that we all have a clean and healthy place to live.

Our purchases are the equivalent of powering 18.5 average U.S. homes for the year, restoring 19,200 five-gallon water cooler containers, and reducing emissions associated with 169,647 vehicle miles traveled.

We are happy to be doing our part and would gladly supply you with information on how to accomplish the same thing. You may be surprised at how little it might cost to offset your household or business for a full year. If you have any questions, as always, do not hesitate to reach out.

Thank you for your business and trust,

Sycamore Financial Group

***This article is distributed for general informational and educational purposes and is not intended to constitute legal, tax, accounting, or investment advice.***

By Sycamore Financial Group|2022-07-20T15:44:02-04:00August 25th, 2021|2021 Newsletters|0 Comments

Financial Freedom

Hello from Sycamore,

What is financial freedom? Financial freedom can mean many different things. To us, it means having the ability to live the lifestyle that you want while working and throughout retirement.

Depending on where you are in your life, the term Financial Freedom may seem overwhelming for many different reasons – you may feel bogged down with student loans, you may have credit card debt that is hard to dig out of, you may be saving for college expenses, you may be saving for your first-time home purchase, you may be saving for retirement, the list goes on. While different lifestyles require different financial resources to be financially free, there are few things we believe will help make financial freedom more attainable:

Build up an emergency fund.
a. This is a personal preference on the “right” number. Typically, between 3-6 months of living expenses is a good rule of thumb.
Create a budget.
a. Often, we don’t know where our money is going – creating a budget and tracking our expenses is a great way to find out where we may be overspending.
Invest enough in your employer-sponsored retirement plan to get the full employer match.
a. You should be doing this while building your emergency fund – the match is “free” money left on the table if you don’t invest enough to get the full benefit.
Work toward paying off debts.
a. Begin paying extra toward your highest interest loans first.
Begin investing in a brokerage account, ROTH IRA, College 529 plan, or increasing contributions to your employer-sponsored retirement plan.
a. It is a good rule to have this come out of your savings automatically each month to make it automatic and easy.
b. Consult with a financial advisor on what the best investment vehicle is for you and your family.

Remember to set small achievable goals and reward yourself when those are met. The process of accumulating wealth and becoming financially free is not short or easy, but it is rewarding.

Everybody’s financial situation is different. These steps will not solve all financial problems and there is no fast and easy magic formula, but they are steps toward financial freedom.

As always, we would love to hear from you! Please reach out with any comments or concerns you may have.

Thank you for your business and trust,

Brent Yard
Sycamore Financial Group

***This article is distributed for general informational and educational purposes and is not intended to constitute legal, tax, accounting, or investment advice. The information, opinions, and views contained herein have not been tailored to the investment objectives of any one individual, are only current as of the date hereof, and may be subject to change. Any ideas or strategies discussed herein should not be undertaken by any individual without prior consultation with a financial professional to assess where the ideas or strategies that are discussed are suitable based on your own personal financial objectives, needs, and risk tolerance.***

By Sycamore Financial Group|2022-07-21T12:07:16-04:00August 10th, 2021|2021 Newsletters|0 Comments

Sycamore Financial Group is now a Certified B Corporation

Hello from Sycamore,

We have exciting news to share with you that we are very proud of!

Sycamore Financial Group was one of the first Corporations in Indiana to become Certified B Corporation®! Since its inception, Sycamore has always wanted to do better, do more – for our clients, for our community, for our families. Over the years as we have grown, we were able to give back more, take steps for the good, and now join the few firms that are Certified B Corporations.

What is a Certified B Corporation? B Corps™ are for-profit companies that use the power of business as a force for good. B Corps™ meets the highest verified standards of social and environmental performance, transparency, and accountability. To become a B Corps™, a company must prove to an independent third-party organization named B Labs® that they operate not solely with profits in mind but are good stewards of the environment, contribute to the local community, and act in ethical manners.

We have and continue to operate and make decisions with a stakeholder approach in mind. This means that our decisions consider all people that may be affected – our clients, our employees, our community, and our owners. Becoming a Certified B Corporation® was a way for Sycamore to solidify our commitment to our community and to focus our goals of continually improving our processes so that we may progress as an organization that benefits all.

From our beginnings nearly 40 years ago, we decided that the best way to structure our business for success and longevity is to always act with integrity and honesty and with our client’s best interests as a priority. This approach, we feel, has been the backbone that has allowed Sycamore to maintain decades-long intergenerational relationships with our clients. Becoming a Certified B Corporation® is our public declaration to you that these values will continue to be upheld.

We look forward to continuing to make strides for the better with you, always having your best interests in mind and continuing to contribute to our local communities.

Thank you for your business and trust,

Craig Smith
Sycamore Financial Group

*Past performance does not assure future results. Investors cannot invest directly in the stock market indexes such as the S&P 500. The investment return and principal value of an investment will fluctuate. Investor value, when sold may be worth more or less than their original cost.

By Sycamore Financial Group|2022-07-21T12:22:37-04:00June 8th, 2021|2021 Newsletters|0 Comments