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

*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 |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 |2023-02-14T01:21:22-05:00February 14th, 2023|2023 Newsletters|0 Comments

Fourth Quarter 2022 Economic Commentary

Hello from Sycamore,

Performance and the Markets

2022 is now in the books and while it wasn’t one to brag about, we feel that overall, during the last 10 years, the markets have been very good.

The question we’d all like an answer to is how will the markets fare in 2023? The short story is…we’re more optimistic about 2023 than we were about 2022. Before we tell you why let me tell you two things that you already know. One – We cannot predict the future. Two – we’re not market timers. With those thoughts in mind, we’ll be happy to share what we think about the next twelve months.

If you travel back to December 2021, you will remember how optimistic most projections were. The market had just finished a great year. At that time, most investors felt confident and were looking forward to a good 2022. However, we were a bit more cautious. If you look at your annual review follow-up letters we sent you from 2021, you will likely find that we were cautioned against expecting a continuation of the outsized market gains we’d been experiencing. Why? When we conduct our investment analysis, we study the earnings of companies and compare those to the current share price (this is a significant simplification of our research process) to determine if we want to hold that security. In 2022, earnings increased more than expected but not as much as share prices, so we were being cautious. We’ve learned that a strong defense can be as – if not more – important than your offense. What does this have to do with our thoughts about 2023?

During the 3rd quarter of 2022, profits of the 500 companies in the S&P 500 index increased by about 9% vs the 3rd quarter of 2021 (Source; S&P Global Market Intelligence). During this same 12-month period, the average share price of these same stocks declined by about 15%. From our perspective, the relationship between earnings and share prices has improved significantly. We are more optimistic about 2023, but we will continue to invest in your accounts with a strong defense.

Speaking of last year, let’s look at some final numbers. For the year ended 12/31/22, our Growth and Income Composite – gross of fees – declined 6.95% while the S&P 500 declined 18.11%. We are very pleased with our relative performance.

The Economy

First, let’s discuss inflation. For the last year, inflation has been a problem. The Federal Reserve has increased the interest rate over the last year to try to slow the rate of inflation and this seems to be having a positive effect. Additionally, we see that producer prices (commodities like corn and beans for example) have declined from an annualized rate of more than 20% earlier this year, to a more moderate annualized rate of less than 9%, and that decline appears to be continuing. This is good news.

Housing is a significant and weak sector. Interest rates are having a major impact on the sale of existing homes and now they appear to be starting to have a similar impact on new home construction. We expect both declines to moderate as buyers become accustomed to the higher interest rate environment, but in the meantime, housing is likely to be a drag on the economy.

Other economic indicators are in relatively good stead. The sale of automobiles, which have been steady throughout 2022 are beginning to trend higher. Unemployment continues to remain near all-time lows and the economy continues to create new jobs. In December we created more than 200,000 jobs and for the year 2022, we created about 4.5 million jobs. This is the second-highest total ever following the 6.7 million jobs created in 2021. Consumer Confidence, which has been declining slowly since mid-2021, seems to be heading north again.

We could talk about the economic data until your eyes glaze over, but suffice it to say that overall, we are cautiously optimistic about the economy during 2023.

Purchase and sale activity during Q-4

During the 4th quarter of 2022, we were relatively inactive- we bought Alphabet and had no sales.

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

Thank you for your continued trust and support,

Sycamore Financial Group

*Data not audited.
**Results reported gross of 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 |2023-01-23T20:44:05-05:00January 23rd, 2023|2023 Newsletters|0 Comments
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