Sage 2023 Annual Letter

Following three consecutive years of positive returns, 2022 was a challenging year for investors as portfolios struggled in the face of prolonged periods of market volatility, the decline of both stocks and bonds, unprecedented interest rate hikes, high inflation, anticipation of a recession, and geopolitical conflict.

We are cautiously optimistic, based on our experience and analysis, that we are starting 2023 in a stronger position and that, over time, our diversified portfolios will perform in a manner that is consistent with our clients’ goals and expectations.

2023 Market Outlook

Financial markets are forward-thinking. So even though the economic backdrop will remain challenging, we expect investment market conditions to be more stable in 2023.

  • We believe three major themes are likely to have a meaningful impact on the broader economy and, subsequently, financial markets:
    • The Fed’s tightening, in response to inflation, will weigh on labor markets.
    • Excess personal savings from the pandemic will remain a tailwind but begin to fade.
    • Consumer spending behavior, including a return to the longer-term spending trend favoring services (versus goods), may help normalize supply chains and alleviate inflationary pressures.
  • Overall, compared to 2022, we expect that the forward-looking nature of equity markets and much more reasonable valuations could help cushion downside volatility and boost returns in 2023.
  • In terms of bonds, a silver lining of the Fed’s unprecedented rate hikes in 2022 is an increase in the potential for better future bond returns heading into 2023. In particular, we believe current yield levels provide an attractive starting point for investment-grade bond returns.
  • We expect economic conditions in 2023 to vary by geographical region.
    • In the U.S., we believe the economy will continue to grow slowly, likely between 0% to 2% in 2023, which is below the long-term historical average of 3%.
    • In Europe, it appears increasingly likely there will be consecutive quarters of negative economic growth in the first half of 2023.
    • In emerging markets, we expect growth to rebound following the conclusion of central bank hiking policies and normalization of China’s strict Covid policy.
    • However, we don’t know what unforeseen developments may evolve. Therefore, to guard against the unknown, client portfolios are constructed for many potential scenarios.

Longer-Term Market Outlook

  • Sage’s approach to portfolio management is not to try to time the markets as it is nearly impossible to predict the short-term returns of any individual asset class/investment category. Instead, we stick to a disciplined strategy that involves rebalancing through market fluctuations and diversifying investments within portfolios. In our view, this disciplined and diversified approach increases the likelihood that our clients will realize their projected performance returns and achieve their financial goals.
  • While it is important to evaluate each year’s performance and consider how it impacts your personal financial picture, we believe it is paramount to focus on your time horizon.

CLICK HERE to access the full 2023 Sage Outlook, including our annual “Base Case View of 2023 Asset Class and Portfolio Performance.”

CLICK HERE for a condensed, bulleted version for those who prefer a shorter piece.

Sage Financial Group in 2022

2022 was Sage’s 33rd year in existence. It is gratifying to reflect on how many relationships we have that span decades and exciting to welcome new clients into the Sage family. Time and growth continue to deepen our commitment to our founding values of helping our clients, and their families make smart financial decisions so they can enjoy peace of mind, achieve their goals, and live rewarding lives. We have never wavered from our commitment to putting our clients’ interests first and foremost, and this core principle will always be our guiding light.

The Sage Organization

Our team is our foundation, and we work hard to recruit, develop, and retain great people. The care we put into our colleagues has created a highly professional and talented team with a 98%  retention rate. Everyone shares a deep sense of humility and respect, which is as evident in their daily interactions with each other as in their relationships with our clients. We believe the team’s determination and passion are vital to our mission.

Sage welcomed two new team members in 2022: Janene Reilly, J.D. (Kings College, Temple University Beasley School of Law), Trusts and Estate Counsel, and William Malloy, CFA (Temple University), Investment Analyst.

We expect two new wealth managers to join the team later this month to help us provide even more comprehensive advice and services while seeking to maintain the high quality of your experience. Some of our best team members were referred by our existing clients, and we welcome introductions to individuals interested in investment and/or wealth management careers.

Opportunities for Innovation

In 2022, Sage continued to look for ways to improve your and our team’s experience:

  • We further enhanced our expertise in the areas of investment planning, private investments, tax planning, trusts and estates, and financial planning.
  • The Sage summer symposium, now in its third year, continues to be an effective way to educate many of our clients’ children.
  • We prepared to introduce a new service for the Next Generation of investors that will be rolled out in early 2023 that we expect will put us in an even better position to support our clients’ adult children.
  • We expanded our use of operational technologies, such as DocuSign for new client onboarding and Schwab paperwork processes. The technology allows us to request and collect your signature electronically, which reduces paper, postage, and, most significantly, time and effort on your part.
  • Most of our meetings continue to occur virtually by utilizing video technologies so we can share information and converse with our clients in a personal manner.
  • But our team returned to the office in 2022.
    • We are maintaining a hybrid schedule, with many team members in the Sage office on multiple days a week, and we have been enjoying Tuesday Buzz Day, when most of the Sage team is working in person, in the office, on the same day.
  • Finally, as you know, part of Sage’s culture is to find ways to help others, especially when so many around us are struggling. While we supported many charities in 2022, one of our most meaningful relationships is Alex’s Lemonade Stand Foundation. We continue to be gratified by how many of you join us each September in support of The Million Mile, the annual virtual run/walk/bike event that helps raise awareness, support, and funds for research into cures for childhood cancer.
    • In 2022, the Sage Million Mile team helped raise more than $70,000, which brings our cumulative total to more than $425,000, translating to more than 8,500 hours of critical research. Thank you to our clients and friends who continue to generously support our efforts.

Closing Thoughts

As we move into 2023, we want to emphasize our deep gratitude for our relationships with you and the tremendous sense of fulfillment we get from helping you and your family plan, build and accomplish your goals.

As always, we welcome your feedback.

Please email us at TheCohns@sagefinancial.com or call us at 484-342-4400 at any time. We look forward to hearing from you.

Sincerely,

 

 

 

Stephen L. Cohn, CFP®
Alan J. Cohn, CFP®

Co-Presidents, Co-Founders

 

The information and statistics contained in this report have been obtained from sources we believe to be reliable but cannot be guaranteed.  Any projections, market outlooks, or estimates in this letter are forward-looking statements and are based upon certain assumptions. Other events that were not taken into account may occur and may significantly affect the returns or performance of these investments.  Any projections, outlooks, or assumptions should not be construed to be indicative of the actual events which will occur. These projections, market outlooks, or estimates are subject to change without notice.  Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, product, or any non-investment-related content made reference to directly or indirectly in this newsletter will be profitable, equal to any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  All indexes are unmanaged, and you cannot invest directly in an index. Index returns do not include fees or expenses. Actual client portfolio returns may vary due to the timing of portfolio inception and/or client-imposed restrictions or guidelines. Actual client portfolio returns would be reduced by any applicable investment advisory fees and other expenses incurred in the management of an advisory account. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Sage Financial Group. To the extent that a reader has any questions regarding the applicability above to his/her individual situation or any specific issue discussed, he/she is encouraged to consult with the professional advisor of his/her choosing.  Sage Financial Group is neither a law firm nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Sage Financial Group’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

Sage Financial Group has a long track record of citations and accolades. Rankings and/or recognition by unaffiliated rating services and/or publications should not be construed by a client or prospective client as a guarantee that s/he will experience a certain level of results if Sage is engaged, or continues to be engaged, to provide investment advisory services. Nor should it be construed as a current or past endorsement of Sage by any of its clients. Rankings published by magazines and others generally base their selections exclusively on information prepared and/or submitted by the recognized advisor. For more specific information about any of these rankings, please visit Our Accolades page or contact us directly.

 

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