Third Quarter 2024 Market Commentary

Hello from Sycamore,

Performance and The Markets

Let’s start with the good news! September is historically the worst-performing month of the year for the stock market, but not in 2024. Our composite gained a little more than 1.5% for September, it has gained a bit more than 27% for the last 12 months, and over the last 10 years, it has gained 224% or almost 11% per year. These have indeed been wonderful times for shareholders. We cannot see into the future, but for practical purposes, we believe the next 50 years will be like the past 50 years. However, over the next 10 years, we expect returns to be muted somewhat when compared to the past 10 years.

Let’s all take a moment to thank Adam Smith for promoting capitalism when our country was formed. Capitalism can be difficult from time to time and brutal occasionally, but it is efficient. As shareholders, capitalism (recessions included) is our friend. Our economy continues to grow, we’re creating more jobs, inflation is being tamped down, and interest rates have been reduced recently. There is always room for improvement and there are always ‘pundits’ sharing their version of doom (bad news sells, ya know), but we do not see anything on the horizon that will derail our economic growth or the stock market. Of course, the stock market can sometimes be emotional, so we’ll need to be prepared for the normal ups and downs. This is not 1999. We are finding many companies that can be purchased at what we feel are bargain prices.

The Economy

As I mentioned earlier, our economy continues to perform well. It appears that the Federal Reserve Bank believes inflation is under control enough to start reducing interest rates. A reduction of 0.5% was announced recently. Our gross domestic product – which recently has been revised upward by the Commerce Department – has been growing at a modest and steady pace of a little more than 2% since 2020. Housing starts are weaker than we would like, but auto sales have remained firm and are trending higher. We think the recent decrease in interest rates will help both industries. Job creation has slowed over the past year, but we still have created almost two and a half million new jobs over the last 12 months. Currently, we expect – and look forward to – more slow and steady growth from our overall economy. Thank you, Adam Smith.

Investors vs Speculators

Each fall we like to thank you for being investors and not speculators, and we like to remind you of our investment goals for your account(s) that are using our ‘Growth at a Reasonable Price’ (GARP) strategy. First, we work to deliver reasonably good returns. Second, through our ‘risk first’ analysis and broad diversification, we make a concerted effort to reduce risk and volatility in your portfolio(s) with us. The markets have been good for so long that it’s easy to forget about the risk side of investing, but we have not been trying to hit ‘home runs’ in the past and we have no plans to start now. We’ve learned over the years that additional risk can mean LESS return. We have no plans to place your capital at additional risk no matter how tempting the current ‘story’ is. Third, we do our best to keep taxes on your portfolio(s) as low as possible, but please remember that taxes are a secondary consideration…our first goal is to earn profits.

Purchase and Sale Activity During Q-3

Sales: Stericycle (SRCL), Sirius (SIRI)
Buys: Nice LTD (NICE), VeriSign Inc. (VRSN)

Thanks for your business and trust!

Sincerely,
The Sycamore Financial Group Team

*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 |2024-10-22T22:23:51-04:00October 22nd, 2024|2024 Newsletters|0 Comments

The Low Down on Retirement Accounts 2024

Hello from Sycamore,

If you are 73 or older and haven’t taken your Required Minimum Distribution (RMD) for the 2024 tax year, you will likely need to by year’s end.

What is an RMD?

An RMD is the minimum distribution you must withdraw from your retirement account each year.

When do I have to begin taking RMDs?

You must begin taking your RMDs on April 1st of the year following the calendar year in which you reach age 73. What does this mean?

  1. Example: Your 73rd birthday was anytime in 2023. As long as you will reach age 73 by December 31, 2023, you must take your first RMD (for 2023) by April 1, 2024.

Then each year after this you must take your RMD by December 31 of that year.

Can I take more than my RMD amount?

You can withdraw more than the minimum amount required. The total amount you withdraw will be included in your taxable income.

Can I take withdrawals before 73?

Yes. Once you reach 59 ½ you may take withdrawals with no early withdrawal penalty. You will still be responsible for regular income tax on the complete amount withdrawn.

You may also withdraw funds prior to age 59 ½ however, you will likely need to pay an extra 10% early withdrawal penalty in addition to the regular income tax.

Highlights for 2024

Retirement Savings Plan Contribution Limits have changed.

  1. 401(k), 403(b), 457 plans, and federal government Thrift Savings Plan contribution limits are $23,000.
    1. Catch-up contributions for those over age 50 are $7,500.
  2. IRA contribution limits increase to $7,000.
    1. Catch-up contributions for those over age 50 are $1,000.
  3. SIMPLE IRA contribution limits $16,000.
    1. Catch-up contributions for those over age 50 are $3,500.

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

*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 |2024-07-16T17:02:20-04:00May 9th, 2024|2024 Newsletters|0 Comments

Third Quarter Commentary 2023

Hello from Sycamore,

Performance and the Markets

It seems like there is always plenty to worry about and this year is no exception. Considering the political environment and the calls for a recession over the past year or so, there is plenty to be concerned about. However, as we think back over the years, there has always been enough to be concerned about, but how many of the things we worried about came to fruition? I think you’ll agree that the answer to that question is very few. According to researchers at Penn State University, only about 8% of the things people worry about come true. From our perspective, what we have today is simply more of ‘the normal’. Share prices and most markets have been declining a bit for the last month or so, but this is not unusual. We’re at about the same level now as we were at the 1st of 2023 and for practical purposes, ad the market has been relatively quiet for almost 2 years.

The economy and the consumer are still strong. The Federal Reserve Bank of Atlanta’s GDPNow estimate for the 3rd quarter of 2023 is +4.9%. This number is a good argument against a recession anytime soon. If a recession does appear, we feel it will likely be mild and after the roughly 25% decline in the S&P about 1 year ago, we feel the markets have already priced it in. Some sectors – especially tech – are a bit overvalued, but overall, we see the market as being ‘fairly’ priced. By the way, we’ve just had ten years of very good share value increases, and we do not expect those ‘outsized’ returns to continue. We look for more modest gains over the next few years. Fixed investments are now certainly paying more than they have since before The Great Recession, but we also have higher inflation, so they are just keeping up. We remain optimistic over the long haul. As we do our research looking for bargains, we are having no trouble finding good value.

The Economy

The economy appears healthy. As we mentioned above, The Federal Reserve Bank of Atlanta’s GDPNow estimate for the 3rd quarter of 2023 is +4.9%. There are still some who feel we will have a recession, but those voices are fading a bit and their predictions have been tempered. It is true that the Fed has been raising interest rates though the rate of increase has slowed considerably this year. Higher interest rates should tamp down inflation and we’re already seeing some success with this. Additionally, the money supply, M-2 is declining. This is unfamiliar territory so time will tell, but we believe this is good and necessary after the cash infusion we had during COVID-19. While all this has been happening, the economy is continuing to do reasonably well. Unemployment is at historical lows, new home sales, which had declined significantly from their 2020 highs have started to trend higher during 2023. Disposable personal income is growing, new orders for durable goods are trending higher, and Inflation – which peaked in mid-2022 at an annualized rate of about 9% – has now dropped to around 5%. Things aren’t perfect, they never are, but overall, there is plenty to be positive about.

Purchase and Sale Activity During Q-3

We bought MDU Resources – MDU, ASGN Inc- ASGN, Forward Air – FWRD and AMC – AMCX

We sold Flour Corp – FLR, Kenvue – KVUE, and Knife River Corp – KNF

We’ve started to shift into longer-term bonds and fixed investments.

Investors and Speculators

Each year we like to remind you of our goals for your portfolio(s). We are pleased to have outperformed the S&P 500 over the last 27 years, but that is not one of our primary goals. Our long-term goals for your portfolio(s) are to deliver reasonably good returns, reduce your overall volatility, and reduce your taxes through lower turnover. Speculators worry about the latest story and today’s market opening direction. Investors purchase good businesses and participate in their growth.

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 |2023-10-26T23:48:28-04:00October 26th, 2023|2023 Newsletters|0 Comments

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 |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

*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

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.

  1. 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.
  2. 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.
  3. 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 |2022-07-21T12:29:41-04:00February 14th, 2022|2022 Newsletters|0 Comments
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