2023 Fourth Quarter Market Commentary

Hello from Sycamore,

2023 is now in the books and this year was special for us because it marked completing 40 years for Sycamore. We want you to know how grateful we are to have had this 40-year run and how fortunate we feel to be able to work with all of you.

We are aware that without your business, Sycamore would not exist. A good number of you have been with us since the beginning and many of you worked with me back in the 70’s. They say that time flies when you’re having fun. Without any doubt, this has been fun and we’re just getting started.

I also want to thank Anita (37 years), Karen (38 years), Kathy (19 years), Brent, and Allison (7 years each) for being the best in class. None of this would work without them, and their value to our company cannot be overstated.

Additionally, we’re happy to report that the markets turned 180 degrees from 2022 and we had nice gains for most portfolios for 2023. We’re looking forward to 2024.

All in, what could be better?

We realize that we are very fortunate, and I personally want to thank each of you again for your business and trust.

Performance and the Markets

As we stated above, the markets reversed course from the decline we had in 2022, recovering more than the amount lost last year. Over the past few years, share prices have remained about the same while, at the same time, most companies that we track have continued to show earnings gains. The longer this goes on the more confident we become that share prices will increase from current levels.

You may have noticed that your portfolio has not tracked closely to the S&P 500 index that we use as our ‘market’ yardstick. The S&P 500 is experiencing a phenomenon as just a few stocks – known as the magnificent 7 – now represent about 30% of the index. These stocks are Apple, Microsoft, Nvidia, Alphabet, Tesla, Meta, and Amazon. Through your account at Sycamore, you likely own some of these stocks, but they do not represent 30% of your equity holdings. It’s the “unexpected” that can cause problems with your portfolio, and we are not about to take large risks with your money. Many of you will remember that we experienced a similar divergence in the late 90s during the Tech bubble. In some ways, it’s different this time, but it’s really not different this time.

The Economy – Remember that we want the economic data to be boring!

The economy continues to do well but we’re not expecting a repeat of the growth (near 5% annualized) that we had in the third quarter of 2023. The Atlanta Federal Reserve Bank has reported that our economy grew at a respectable annualized rate of 3.3% during the 4th quarter of 2023. Our economy continues to produce new jobs – about 2.7 million in 2023 – and the unemployment rate remains historically low at about 3.7%. Per capita Real Disposable Personal Income now stands at about $50,000. Just before COVID-19, that number was about $48,000. We are continuing to make progress. The Federal Reserve Bank has been raising interest rates for about a year and it seems to be having the desired effect on inflation which has dropped from about 6% at the beginning of 2023 to about 3.5% by year end. It usually takes about 12-18 months for the effect of an interest rate increase to show fully so we’re expecting the effect of the interest rate increases to be more evident in the next 6 months. We expect that these rate increases will continue to slow the rate of inflation and before long, we expect the Federal Reserve Bank to reduce interest rates.

Purchase and Sale Activity During Q-4

Sales: Kelly Services, Petmed Express, Embecta, Kyndryl, Bell Ring, Post Holdings, Kellogg, Kelonova, Tupperware and Sandoz Group.
Buys: International Flavors and Fragrances.

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.***