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What Happened Last Week and What It Means to You: Week Ending June 23, 2023

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Week Ending Jun 23, 2023

Productivity down…According to the Bureau of Labor Statistics, manufacturing sector labor productivity decreased 2.5% in Q1, as output decreased 1.0% and hours worked increased 1.6%.

What does it mean – The decline in productivity marked the first time the four-quarter change series has remained negative for five consecutive quarters since the series began in the first quarter of 1948.

 

Labor costs increase…According to the same report from the Bureau of Labor Statistics, unit labor costs in the total manufacturing sector increased 3.1%.

What does it mean – Driven by a 0.5% increase in hourly compensation and a 2.5% decrease in productivity, the costs of goods sold are increasing. If this continues, expect inflation to continue.

 

Cost of labor continues to go up…According to the Bureau of Labor Statistics, wages and salaries increased 5.1% for the 12-month period ending March 2023 versus 5.0% for March 2022. Benefit costs increased 4.3% for the 12-month period ending in March 2023 versus 4.1% for March 2022.

What does it mean – On top of overbearing government regulations, employers are paying more for labor and benefits. Expect the cost of labor and benefits to be passed on to the consumer. This will hit your pocketbook.

 

According to the Federal Reserve, consumers continue to hit their credit cards…Revolving credit increased by $13.5 billion to $1.244 trillion. Nonrevolving credit increased by $9.5 billion to $3.616 trillion.

What does it mean – The key takeaway from the report is that credit expansion continues to grow. Driven by revolving credit, which is apt to stoke concerns that consumers, battling inflation, are relying more on the use of credit cards to maintain their spending activity.

 

Inventories continue to rise…U.S. Corporations are continuing to see inventories rise.

What does it mean – In one hand, an increase in inventory could mean companies are planning for a higher turnover and this could lead to increasing profits if managed correctly. On the other hand, if markets do not adjust, companies face several major risks that include risk to cash flow which in turn reduces profits, increases storage costs, and raises the risk of product obsolescence and limits flexibility.

UK inflation stands out relative to peers…Great Britain and most of Europe continue to see high rates of inflation.

What does it mean – While we see the size of government continue to grow in the U.S., Europe’s inflation issues are a direct result of massive government spending as a percentage of their GDP and continued printing of money to meet massive pensions and benefit programs.

Move outs…Companies leaving China are now known as “Move Outs”. China does not want you to know this. Western manufacturing companies have finally begun to wake up to the fact that China steals all their intellectual property and in turn western companies are funding their competition and their demise. Hopefully soon Apple, Microsoft, Tesla, Blackrock and Vanguard will get a clue.

What does it mean – Eleven percent of EU companies have already moved out of China and another 7% plan to. According to the American Chamber of Commerce in China, 49% of U.S. companies said they feel less welcome than a year ago; that rises to 56% in the consumer sector.

 

For almost 40 years, American companies focused on cheap labor and turned a blind eye on child labor and slavery for increasing profit margins in China. CEO’s and the boards of these companies did not care or even worse, they did not seem to realize what was really happening.

Good intentions, bad policy. The theory in DC was, if we create strong trade ties, then China will become more democratic and freer and peace will prevail. According to Joel Ross, “that was naïve and equally foolish as letting them into WTO which opened the world to China. That one step was the key to all that has followed.”

Let’s roll America!!

Doug De Groote, CFP®, MBA, CTC
Managing Director

De Groote Financial Group, LLC is a federally registered investment adviser that maintains a principal office in the State of California. The information contained in this message is confidential, protected from disclosure and may be legally privileged. If the reader of this message is not the intended recipient or an employee or agent responsible for delivering this message to the intended recipient, you are hereby notified that any disclosure, distribution, copying, or any action taken or action omitted in reliance on it, is strictly prohibited and may be unlawful. If you have received this communication in error, please notify us immediately by replying to this message and destroy the material in its entirety, whether in electronic or hard copy format.

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Jeannie Ewing-Nicholson

Operations Manager

Jeannie started her career in the Financial Services industry in 1994 with Oppenheimer & Company. As part of the De Groote Financial Group, Jeannie is responsible for the operational needs of the firm including cash management and account administration. With her upbeat attitude and attention to detail, Jeannie provides an efficient streamlines experience to ensure clients meet their goals. Jeannie enjoys travel, outdoor activities, Pilates, and is a football and basketball fan. She resides in Westlake Village with her husband, daughter and son.

Mary-Ellen Lykken

Executive Assistant

Mary-Ellen, Executive Assistant at DFG, keeps the office running smoothly by providing administrative support and assisting with scheduling and organization. With a background in human resource and office management, Mary-Ellen comes from the non-profit and services industries.

Outside of the office, Mary-Ellen is committed to the advancement of independence and productivity for those with disabilities. By telling her story of the challenges and joys of raising a child with complicated disabilities, she hopes to help others navigate similar circumstances.

She is happiest when visiting her two grown sons. Otherwise, you can find her competing on the pickleball courts.

Sara Mariniello

Operations Manager

Sara is new to the financial industry only starting in 2022 when she was hired at De Groote Financial. As Operations Manager, Sara is responsible for all the paperwork surrounding opening accounts and investment paperwork and is also responsible for much of the client communication. Sara has her bachelor’s in science and nursing from Concordia University, Texas and worked as nurse for over a year prior to moving back to California. She loves all things sports and church related and is likely spending every free moment with her Husband visiting family in Texas and New Jersey.

Fadi Ahmed

Chief Operations Officer and Chief Compliance Officer

Fadi works with clients to ensure an exceptional experience. He coordinates and assures the planning process and wealth management tools are at your fingertips to provide the clarity you deserve and the transparency and access to all your accounts. Fadi ensures the data and information is reflective in our planning software. All changes and updates flow through his desk and he coordinates those changes with the rest of our team.

Andrew Krout

Wealth Advisor, Co-Chief Investment Officer

Andrew Krout is a Wealth Advisor at De Groote Financial Group, LLC. He also serves as a Co-Chief Investment Officer for the firm, focused on wealth management.

Previously, Andrew served as CIO with Kelly Financial in Boston Massachusetts since 2013. He is a licensed investment advisor representative and insurance producer. He graduated from Saint Francis University with a bachelor’s degree in both finance and accounting. He is a candidate for CERTIFIED FINANCIAL PLANNER™ designation. Andrew holds life insurance licenses in Massachusetts, New Hampshire and Connecticut.

Andrew is passionate about serving his clients and investment management and how to apply news and current events to investment decisions. He played Division 1 golf in college, and still enjoys playing and watching the sport in his free time.

David Darst

Co-Chief Information Officer

David Martin Darst, CFA is an Investment Advisor to DeGroote Financial Group, specializing in asset allocation and product selection. Previously, David served for 17 years as a Managing Director and Chief Investment Strategist at Morgan Stanley Wealth Management, with the responsibility for Asset Allocation and Investment Strategy. He joined Morgan Stanley in 1996 from Goldman Sachs, where he held Senior Management Posts within the Equities Division and earlier, for six years as Resident Manager of their Private Bank in Zurich.

David is the author of 13 books, including bestsellers The Art of Asset Allocation, 2nd Edition (McGraw-Hill), and The Little Book that Still Saves Your Assets (John Wiley & Sons). He also appears as a frequent guest on CNBC, Bloomberg, FOX, PBS, and others, and has contributed articles across a variety of publications.

David graduated with a BA in Economics from Yale University, and earned his MBA from Harvard Business School. He has lectured extensively at Wharton, Columbia, INSEAD, and New York University Business Schools, and for nine years, David served as a visiting member at Yale College, Yale School of Management, and Harvard Business School. He is a CFA Charterholder and a member of the New York Society of Security Analysts and the CFA Institute. 

Doug De Groote

Managing Director

Doug is a Certified Financial Planner™ (CFP®) with an MBA in Financial Planning, and is an active member of the Financial Planning Association (FPA). Before establishing De Groote Financial Group, Doug founded the United Wealth Management division of United Capital. Prior to that, Doug was a partner at Crowell, Weedon and Co. He regularly contributes to a variety of financial and general media.

Doug’s passion, and what he believes, is that everyone deserves the opportunity; they deserve to have the freedom and responsibility to be pro-active in achieving independence and financial success.

Doug’s life is focused around his family, wife and three children, and making sure they get the foundation that is necessary for them to have the awareness of the opportunities that abound in our great country.

Doug helps increase his client’s awareness and success, to identify and take advantage of opportunities that present themselves and help protect them from some of the pitfalls or obstacles that are thrown in our paths. With regards to their financial circumstances, Doug helps his clients identify their goals, plan for various outcomes and manage their assets to help them make their vision a reality.