Hello from Sycamore,
Performance and the Markets
We are pleased to report that the first quarter was a bonus quarter with our composite gaining more than 7%. This is about three times the normal gain that we would expect so we’re pleased. While we do expect your account(s) to gain more before the year-end, we doubt that the current pace will be sustained. There’s plenty of good news on the economic front, and as you know we believe – in the long run – share prices and your account(s) value will follow the profitability of the companies you hold. There’s much that we cannot control but we can control the quality of the companies in your account(s), and that is where we put our efforts. Obviously, we want as much growth as possible but only if the risk is not too large. Maximizing growth is important, but not as important as controlling risk.
Does anyone remember early 2022 when many were expecting increasing interest rates to spark a recession? Hasn’t happened yet! Our economy continues to be stronger and more resilient than expected. If inflation moves lower, we expect interest rates to decline later this year. Lower interest rates could provide a boost for the overall economy and share prices.
The Magnificent Seven (Microsoft, Alphabet, Amazon, Apple, Meta, Nvidia, and Tesla) are still on a roll. As a group, they gained more than 100% and accounted for about 50% of the S&P 500 gain last year. As we have reported before, they now represent about 30% of the S&P 500 index. Maybe they’ll go up at this rate forever! Maybe this time it really is different! Maybe!
The Economy
From our perspective, the economy is solid. Inflation has been a bit more stubborn than we would like, but it’s better than one year ago. The current rate is about 3.5% which is a nice reduction from the roughly 9% peak in mid-2022 and…Producer Prices continue to decline. The Federal Reserve Bank of Atlanta now expects our economy to grow at a respectable rate of 2.4% for the first quarter of 2024. Unemployment continues to be historically low at less than 4%, which is better than our long-term average. The Bureau of Labor Statistics reported that we created more than 300,000 new jobs in March alone.
We are not saying everything is perfect, it rarely (if ever) is. For instance, commercial real estate values have declined somewhat over the past year or so, and new home sales could be better. We are saying that the economic underpinnings appear to be in place to support growth for both our economy and the companies that we have placed into your portfolio(s). In the long run, betting against the U.S. economy and everyone who runs a business, has been a poor bet. We remain optimistic.
Managed portfolio purchase and sale activity during quarter 1
Sales: Sally Beauty, Sirius XM Holdings, and Hexcel.
Buys: Dentsply Sirona, MGP Ingredients, UGI Group, and Malibu Boats.
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.***
