Last year brought a collective rebound for major economies and financial markets. There were unsettling moments and expectations of a domestic recession that caused uncertainty and short-term discomfort—but the year closed with a noteworthy financial markets rally in the fourth quarter, providing an uplifting finish.
Investors entered 2023 still grappling with the aftermath of 2022, which was marked by widespread bear markets for the major stock indices and the poorest calendar-year return from bonds in modern history. In 2023, interest rates soared, dipped, then rose again through October, a handful of U.S. regional banks failed over five days in March, and war, with all its violence and distress, persisted in Ukraine and erupted in the Middle East. Nonetheless, the U.S. consumer and economy proved particularly resilient. It appears that the rate hikes adopted by the U.S. Federal Reserve (Fed) facilitated a decrease in inflation without triggering a recession. Global central banks, generally following a similar directional course on rates as the Fed, helped cool inflation while averting deep recession across the major economies. The markets regained momentum in early November, and we entered 2024 with a modest tailwind.
For Sage, 2023 marked our 34th year helping individual investors and their families pursue their financial goals. We leveraged a more robust and integrated array of complementary wealth management resources, planning tools, and talent alongside our ever-rigorous investment processes and analytics. We are honored by – and so much the better for — the many relationships we have forged over time and are deeply pleased that we continued to find ways to introduce fresh value. In some cases, these relationships span decades. Increasingly, they are layered across multiple generations. We are also excited to continue to form new bonds, welcoming new clients and team members into the Sage family. Time and growth continue to deepen our commitment to our founding principles and values. We will never waver from our commitment to putting clients’ interests first and foremost and seeking to provide them with peace of mind about their financial lives and goals.
2024 Market Outlook
In 2024, as we shift our attention from elevated inflation to potential slowing economic growth, our commitment remains steadfast to tailor your portfolio to align with your unique investor profile and time horizon. We will also stay vigilant in preparing for diverse situations, remaining poised to adapt strategies, adjust tactics, and seize opportunities presented by evolving market conditions.
We believe three themes will likely impact the broader economy and financial markets in 2024.
- Global central banks will begin to cut rates. Lower rates should support stocks and bonds if economies are growing.
- Cash will move off the sidelines as interest rates decline and investors feel more confident about stocks and bonds.
- Domestic inflation will move closer to the Fed’s 2% target as stress on supply chains continues to ease and the recent ramp-up in corporate capital expenditures alongside ongoing initiatives to further utilize technology and integrate Artificial Intelligence boost operational efficiencies and increase productivity.
Fixed income should provide portfolios with an important pillar of stability.
- We favor investment-grade intermediate-term bonds, which offer higher income levels than we have seen in over a decade. Moreover, these bonds allow for potential price appreciation in a controlled manner, effectively mitigating the impact of interest rate fluctuations, especially if rates fall.
U.S. and international equities should provide another year of positive performance despite our anticipation of slower global growth.
- We remain cautiously optimistic about U.S. large-cap stocks following the strong but concentrated rally in 2023 in mega-cap U.S. technology stocks.
- Mid and small-cap stocks present an opportunity that may not be immediately apparent, as smaller companies are more sensitive to an economy’s direction and level of interest rates.
- Our conviction is that the performance of U.S. versus international equities will rotate over time. While U.S. equities have outperformed global markets for much of the past decade, we think the broader composition and more attractive valuations in place across international markets can provide beneficial diversification, given correlation levels across U.S. large-cap equities.
CLICK HERE to access the full 2024 Sage Outlook, including our annual “Base Case View of 2024 Asset Class and Portfolio Performance.”
CLICK HERE for a condensed, bulleted version.
Longer-Term Planning for Clients
- As we look ahead, we believe that managing portfolio equity exposure with balanced optimism should help Sage clients grow their portfolios and reach their financial goals over their particular time horizons.
- Navigating financial markets year after year can present challenges influenced by macroeconomic, geopolitical, and company-specific factors. Short-term periods of turbulence can conflict with longer-term objectives, particularly if we do not remain disciplined and focused on our goals and time horizon.
- So, while we remain prepared for potential stressors, we believe our purposeful approach and integrated personalized financial planning should help position our clients for long-term success.
The Sage Organization in 2023
Everything we do begins with our team. We work hard to recruit, develop, and retain great people. The care we put into our people has created a highly professional and talented organization with a 98%+ team member retention rate that mirrors our 98%+ client retention.[1] We are incredibly proud of everyone at Sage and recognize that their determination and passion are vital to our success and our clients’ experience.
In many ways, 2023 was a transitioning year for the organization as well as the financial markets. Our team gradually shifted away from the remote work practices put in place and maintained throughout the pandemic and is now back working routinely at the office, enjoying the deeper levels of collaboration, professional development, and relationship building we had missed. Sage’s team has never been more cohesive, nor has our culture ever been more robust. Our culture defines our perspective and ways of operating. We spend a great deal of time tending to its quality and strength. It is so important to us that it has its own name: SageSense.
SageSense begins with people and the genuine, long-term relationships we form with each other and our clients. It succeeds through teamwork and prioritizes rigor, diligence, the Golden Rule, and helping others. We believe our team’s level of passion and connection is unique and directly influences the quality of the experience and service we provide for you. But as with everything we do, SageSense never stops improving.
In 2023, we developed new ways to promote SageSense, our culture, and our team, including:
- Monday Mindsets – weekly emails crafted by team members that are reflective and inspirational.
- Buzz Days – a weekly day when the entire team is together in person and the energy in the office is electric.
- Sage Huddles — a bi-monthly all-team gathering to share business updates, discuss new initiatives, and celebrate individual professional and personal milestones and accomplishments.
Sage welcomed three new team members in 2023, all with over 10 years of experience in the financial services industry, advanced education, and exceptional character, including strong work ethics and a deep commitment to helping people. These new team members have joined Sage to provide additional resources as the firm continues to grow.
Kevin Megargel, CFA, CFP®, MBA Executive Wealth Manager. Kevin has spent more than 15 years in financial services, primarily as an Outsourced Chief Investment Officer at Vanguard.
Ryan Kraus, CFA Senior Wealth Manager. Ryan has over 10 years of experience in the financial services industry, primarily at the institutional investment company Lincoln Financial Group.
Garrett Savidge Client Services Associate. Garrett joined Sage with over 10 years of operational experience in the financial services industry and a desire to be part of an organization committed to helping others.
Finally, as you know, an important 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 2023, Alex’s Lemonade Stand Foundation remains one of our most meaningful relationships. The Sage Million Mile team raised over $35,000 in 2023, bringing our cumulative total raised over the years to just shy of $500,000. This translates to more than 8,985 hours of critical research that we have helped fund. Thank you to the clients and friends who continue to support our efforts so generously.
Closing Thoughts
As we move into 2024, we want to emphasize our deep gratitude for our relationships and the tremendous fulfillment we get from helping our clients plan, build, and accomplish your goals.
As always, we welcome your feedback and are interested in knowing if we can do more to improve your experience with Sage. Please email either of us at scohn@sagefinancial.com or acohn@sagefinancial.com or call us at 484-342-4400.
Sincerely,
Stephen L. Cohn, CFP®
Alan J. Cohn, CFP®
Co-Presidents, Co-Founders
[1] Our client retention is calculated annually and reflects a one-year time period. Our team member retention is calculated annually and reflects the average of a five-year period. We adjust either number when the change in either direction is equal to or greater than 2%.
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Disclosures
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 that 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 referred 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 reflect 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 managing 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 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.
