q3: 2020 community f...with professional tax, accounting, investment, legal, or other competent...

[1] INVESTMENT & FINANCIAL INSIGHTS Q3: 2020

Q3: 2020

We provide the information in this newsletter for general guidance only. It does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consult-ing of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, investment, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, expressed or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

[email protected]

MEGAN EBERSOLE, CFP®Investment Advisor

[email protected](317) 238-2857

BEV TAYLOR, CTFAWealth Advisor


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A N E W S L E T T E R F R O M T H E I N D I A N A P O L I S W E A L T H M A N A G E M E N T & T R U S T T E A M

PLAINFIELD

or more than a century

Stock Yards Bank has been witness to its fair share of struggles and challenges that we as a community have faced over the years. Few would argue,

however, that 2020 has been exceptionally trying and profound. As a community bank, we place great value on connecting with our customers in a personable way. With the reduction of face-to-face meetings and walk-in tra�c at our branches, we have truly missed these personal interactions. Warm smiles, �rm handshakes, and the occasional hug are the way we have always done business. Unfor-tunately, due to recommended precautions these exchanges have been temporarily replaced with �st bumps, nods of recogni-tion, and mu�ed greetings behind face masks. Observing social distancing guide-lines has been especially frustrating for us in this regard. We are hopeful that one day soon we may return to the custom of interacting with our clients in a more traditional way.Tradition is important to us at Stock Yards, but we know it is equally important to remain �exible and willing to adapt. �ings change; technologies, practices, priorities, expectations. We pay attention to these shifts as they arise and make smart and innovative adjustments to the services we provide in order to meet the needs of

F the community. Our customers are our most vital asset and we are here to listen and respond, just as we always have. �is year has certainly brought with it some signi�cant and unexpected issues, and we appreciate your patience and understanding as we monitor daily updates on the matters at hand and consider the recommendations we receive.All of us have been touched by recent upheav-als in some way, shape or form. A community by its very de�nition is comprised of individu-als, and it would be remiss not to acknowl-edge that each challenge is unique to the individual experiencing it. Sometimes challenges forge unity but they can sometimes create division, as well. It is my fervent hope that each of us, both as individuals and as a collective community, succeed in overcoming the di�culties before us and that we emerge stronger than ever. As I said before, things change and unfortu-nately for us, one of our most valuable team members has decided the time is right for retirement. Mark Holloway, our Chief Investment O�cer for Wealth Management & Trust, has been a member of the Stock Yards family for 26 years. �e legacy he leaves behind and his contribution to this institution cannot be measured. We will miss his leadership, his calming presence, humor, and friendship, but we wish him nothing but joy as he begins this next chapter! True to Mark’s character and leadership he has trained and mentored the great investment team he leaves behind, allowing for a smooth and seamless transition. We will carry on with our proven investment process and philosophy, communicating often and openly with our clients, and like Mark, will always put their best interests above all else. •

Community

KATHY C. THOMPSON, J.D.Director of Wealth Management & Trust



fter falling 20% in the �rst quarter and 35% from

all-time highs the second quarter surprised even the most optimistic economists and strategists by rallying to erase nearly all of the year’s losses. �e Standard & Poor 500 gained over 20% in the quarter and now

is down only 3% year to date. What made the recovery even more amazing is that it happened in the middle of the Covid-19 pandemic and in the face of a recession of unknown depth and duration. Fixed income returns on interme-diate high quality �xed income as measured by the Barclays Aggregate Index were 2.9% for the quarter and have returned 6.1% year to date.THE ECONOMYWe and most economists believe that we are in the early stages of a coronavirus induced recession of unknown extent. Attempts to control the spread of the coronavirus have neces-sitated the virtual shut down of businesses large and small on a global basis. Nonessential businesses are operating with skeleton sta�ng or not at all with essential businesses maintain-ing operations with a majority of people work-ing from home. �e travel and leisure industry, being impacted the most, has greatly reduced or suspended operations and laid o� employees. It is unknown how responsive consumers will be to the partial reopening of shops, restaurants and businesses that began in early June and what type of recovery we will experience. Will it be a quick bounce back to normal activity or will we have a gradual recovery as employment slowly comes back and consumers regain con�-dence? Will there be a new normal both in terms of how businesses operate and in spending and employment patterns?�e consensus view on the U.S. economy is that the �rst, second, and third quarters of this year will be negative. �e second revision of �rst quarter GDP estimates are out and indicate a decline of 5.0% in economic growth. Guessti-mates for the second quarter GDP range from down 5% to down 40% with a continued decline in the third quarter similar to the magni-tude of the �rst quarter. Strategists predict a modest uptick in economic activity in the fourth quarter. Contributing heavily to the decline in econom-ic activity has been the dramatic rise in unem-ployment. �e unemployment rate has risen from 3.5% in March of this year to an estimated 15% in May. We have never experienced such a rapid rise in unemployment. �e type of economic recovery that will eventually take place will depend on how rapidly we return to full employment levels. A large part of our economy is dependent on consumer

A


MARK HOLLOWAY, CFA®Chief Investment Officer

Economic & Market Outlook Q3: 2020spending and working Americans spend money much more freely than the unem-ployed. A double edged sword in this problem is the amount of unemployment relief that has been granted by states and the payments given to the population under certain income levels by the Federal Government. Many Americans are making more through these payments than by working making them reluctant to seek work. Recent employment data were much stronger than consensus estimates proving the di�culty of predicting economic data in this new and unique environment.THE CAPITAL MARKETS�e initial decline in stock prices in the �rst quarter was due to the many unknowns regarding the coronavirus. Investors panicked and sold stocks because of uncer-tainty regarding the impact and spread of the coronavirus, the rami�cations the virus would have on economic activity, and the resulting hit to corporate pro�ts a recession would entail. �e unknown decline in corporate pro�ts made valuing the market di�cult. Without a �rm idea of what future economic activity and earnings will be, it is impossible to determine valuation measures like PE, Price/Sales, future dividend yield, and price to cash �ow ratios that have tradi-tionally been used to place valuation bound-aries on the market.Amazingly, the market has regained nearly all of the losses associated to the early selling proving once again that it is impossible to time the markets. If you had sold stocks after the initial market decline you would have missed one of the best periods of stock market recovery on record; e�ectively torpedoing your performance for the year and possibly even longer. Currently, the market is now down 3% year to date. �is does not mean that volatility is over. �e stock market will continue to react emotionally to news headlines both positive and negative until the unknowns regarding the severity of the decline in economic activity, the impact on corporate pro�ts, and the unemployment picture all become clearer. Many also fear a second round of increasing coronavirus cases and deaths as we begin to reopen the economy.�is has been the fastest decline and come-back by the domestic stock market on record. �e most frequently asked question we have been getting from clients is why the stock market reversed direction and rallied so suddenly. We think that there are several reasons that the market recov-ered. We believe that market participants realized that the coronavirus pandemic was not as prevalent or as lethal as �rst thought. Many of the early models pertaining to the virus were predicting upwards of one million deaths in the United States alone. �e death toll and su�ering have been staggering, but nothing close to some of

the early expectations. �e proactive approach to combatting the virus through self-quarantining and social distancing obviously worked to a large degree. Strate-gists were also very pleasantly surprised by the very quick response by the Federal Reserve and the Federal Government in their attempts to add liquidity, reduce interest rates, and pass legislation aiding individuals and businesses. �is has softened the impact and hardship of the impending recession and in all likelihood, will hasten the recovery. Finally, interest rates declined to levels that were not competitive with stocks. �e liquidity added by the Federal Reserve through a new round of quantitative easing needed somewhere to go and much of it found its way into the stock market. Investors discovered that high quality stocks with well covered dividends provided dividend yields that were in many instances three or four times the income levels available on high quality, intermediate maturity bonds. Perhaps the stock market as a leading indicator is telling us by rallying that the recession will not be as bad as we feared.Which brings us to the bond market. Interest rates have declined on �xed income investments world-wide. �e threat of de�ation and global recession has now become the primary concern of the world’s central banks. As a result, we believe inter-est rates will remain lower longer than normal. �ere is also an element of politi-cal expediency associated with these low rates. Governments all over the world are borrowing and spending money to reduce the hardship of lower economic growth and to stimulate economic activity. �e only way we can feasibly run $5.0 trillion dollar annual de�cits in the United States is to be able to �nance those debts at very low interest rates. As an example, the Federal Government reactivated the sale of 20 year notes selling $20.0 billion in the �rst auction. It is anticipated that there will be monthly sales of 20 year bonds for the foreseeable future. Eventually, the amount of debt, de�cits, and liquidity will create in�ationary pressures.


JOAN SCHADEinvestment Advisor


Jack Gillette’s career in the �nancial industry began in 1979 and we are fortunate that those last 14 years have been here at Stock Yards Bank. As an Investment Advisor, Jack will tell you that every day in the investment world brings new challenges. This is one reason he reaps such satisfaction from his professional life. It’s never boring!In his personal life, he also �nds community service to be a rewarding and satisfying endeavor. Stepping up and getting involved when there is an opportunity to help has been a steady pattern and way of life for Jack. Over the years, he has served in many di�erent roles in a variety of organizations.

ADVISOR SPOTLIGHT

Until that day, interest rates will remain arti�cially low and may approach zero as governments and central banks wage battle against the bigger economic and de�ationary scares.As always, please contact your wealth manage-ment advisor for a more detailed discussion about our outlook for the economy and capital markets and the recent portfolio changes. �ank you for the opportunity to handle your �nancial and investment a�airs.One last note. �is is my �nal Investment Insights article. I am retiring on July 1 after 26 years with Stock Yards and 44 years in the investment management business. �ere are a number of individuals and groups to whom I owe a debt of gratitude and thanks. �ank you to all of my coworkers at Stock Yards Bank and Trust and especially the members in Wealth Management & Trust. You are a very special group of people and the main reason that Stock Yards is one of the top performing banks in the country. I will miss our day to day interactions, the challenge of solving client �nancial problems, and selecting securities together. It has been an honor working with each of you. �ank you also to the senior management and Board of Directors at Stock Yards Bank. You gave me a free hand to develop our investment process. You also allowed me to do the kind of work for which I was best suited and provided me with challenges that were not available at other organizations in Louisville. You supported me when I needed it the most and for that I will always be indebted. Finally, to our clients and shareholders, thank you for your business, support, and encourage-ment over these many years. We have always been there for you in good times and in bad. Many of you are more like family than clients. �at fact will not change with my retirement.�ose of you who know me best realize that I already have new goals and challenges for the fourth quarter of life. �ere are long neglected hobbies and pastimes to become familiar with again, and charities with which to work. Stay safe and healthy. I leave you in good hands. •

It seems that Covid-19 has changed the future for all of us in one way or another. As we are trying to adjust the way we live and do business on a day to day basis it might be a good time to revisit things we have done in preparation for our future. The de�nition of the word “prepare” as de�ned by Webster is “to make or get ready for some purpose, task or event.” One of the many things we do in the Wealth Management Group is help our clients plan for events throughout their lives. We do Financial Planning and Estate Planning to help our clients prepare for the unknown timing of future events.

In this process we realize there are a tremendous amount of details to consider. In an e�ort to help you compile this information in one convenient place, we have created a document to record your personal a�airs called “Tying Up Loose Ends.” This booklet is meant to be a resource for you as an addition to any plans you already have in place. If you prefer a hard copy, please let us know and we will be happy to provide you one. However, because we know things change over time, we also have it available on our web page in a �llable format at syb.com/wealth-management-and-trust/news. By downloading this document it will make it easy to save, update, print and even forward to the people responsible for taking care of things on your behalf when you are gone or possibly become incapacitated.

Please visit our website to take a look and let us know what you think. We are here to help you “tie up any loose ends” in the preparation of your future. •

JACK GILLETTEInvestment Advisor


Preparation is Key

In addition, Jack also enjoys spending time with his wife and children, gol�ng, reading, and traveling. Strong character and a sincere dedication to work, family, and serving others are all qualities we look for in employees at Stock Yards Bank. Having Jack on board contributes greatly to our team, as well as to the numerous organizations to which he has devoted his time and energy. •

Metro United Way - Grants CommitteeSt. Philip Nieri Catholic Church – ESL InstructorFarmington BoardOldham County Fair BoardNorth Oldham High School Booster ClubUpward Basketball - Youth CoachGirl Scouts of Kentuckiana - Finance CommitteeSt. Francis in the Fields Episcopal Church - Member

We Are Here to Help You With “Tying Up Loose Ends”

WEALTHMANAGEMENT& TRUST

11450 N. Meridian StreetCarmel, IN 46032

NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE

CARMEL: 11450 N. Meridian Street - Carmel, IN 46032SOUTH: 7915 S. Emerson Avenue - Indianapolis, IN 46237DOWNTOWN: 201 N. Illinois Street - Indianapolis, IN 46204BINFORD: 6840 Lake Plaza Drive - Indianapolis, IN 46220PLAINFIELD: 345 S. Perry Road - Indianapolis, IN 46168


MARK GANCHIFF, CFP®Investment Advisor


If you have stayed fully invested in the market the �rst six months of 2020, give yourself a pat on the back for withstanding one of the nastiest market sello�s in history. Stocks have recovered a large portion of their losses, leaving both investors and advisors mentally drained.

Although the markets and your portfolio values have nearly recovered, this does not mean you should let up on your path to achieving your �nancial goals. Let’s review and consider some ideas that can help protect yourself from future market sello�s. If appropriate, start putting these ideas into practice today. REVIEW CASH ALLOCATION – Some investors found themselves short on cash during the recent pullback. Even though cash can be a drag on portfolio returns when markets are going up, having a 6-12 month allocation to cash is a good starting point for investment portfolios from which you are taking regular distributions. This should be done on an account by account basis to help ride out storms in the market. Also, consider having a piggy bank of cash outside of your investment portfolios for unexpected repairs to the house, unforeseen medical events, and other circumstances of that nature. Every investor is di�erent, so �nd an amount that is comfortable for you and your lifestyle. MAXIMIZE NON-PORTFOLIO INCOME SOURCES – The recent downturn demonstrated to everyone the importance of having stable income from sources outside of your investment portfolio. Delaying Social Security is a di�cult decision that can pay big dividends for those with a long life expectancy. If you opt to exercise this strategy, you may consider having a more conservative tilt in your investment portfolio to help support the

KEITH BLAKELY, CFA®Investment Advisor


ADVISOR INSIGHTS:

We are pleased to welcome Mark Ganchi� to Stock Yards Bank Wealth Manage-ment & Trust. Mark has worked in the �nancial industry for 29 years as both an investment advisor and a �nancial planner. Prior to joining Stock Yards, Mark was a managing director at a major bank in Chicago and a �nancial planner at the largest investment advisory �rm in Louisville. His specialties include healthcare and retirement planning and life stages counseling. A graduate of Cannon Financial Institute Trust School and Indiana University/Bloomington, Mark is a CERTIFIED FINANCIAL PLANNER™ and currently holds Finra Series 7 and 66 licenses. •

The Market has Recovered... What Now?

Welcome!

higher level of distributions while delaying Social Security. This conserva-tive tilt can moderate as you approach your bene�ts �ling date.WILLINGNESS TO ACCEPT MARKET RISK – Were you tempted to sell stocks during the market downturn, or feel that your lifestyle would be perma-nently impaired if the market stayed down for 2-3 years? If so, you need to revisit your asset allocation in your portfolios. Review your �nancial goals and see if they can be met with a lower equity allocation. Start with lowering the equity allocation in the account from which you withdraw the most money for recurring distributions, often times your IRA. This is especially important if you are subject to Required Minimum Distributions. If the last market downturn made you particularly concerned, don’t feel alone. Talk with your advisor to ensure that you are implementing the right strategies before the next downturn hits the markets. Our advisors are equipped with sophisticated �nancial planning software, as well as years of experience, to guide you through di�cult times. •

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