| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Sage Advisory navigated a challenging first quarter marked by the Iran war, private credit stress, and AI margin concerns that drove global equities down 3.3%. Energy prices surged 50% with Brent crude climbing from the $60s to above $100, disproportionately impacting energy-dependent regions like Asia and Europe. The firm maintains their base case that this represents an inflation shock rather than a growth shock, with the economic cycle dented but not derailed. They positioned defensively with reduced credit risk, overweight agency MBS, and selective exposure to money-center banks, utilities, and natural gas businesses. Recent market weakness created opportunities to add duration as Fed pricing became overly aggressive, and to increase equity exposure in balanced accounts. Looking forward, any easing of Iran tensions could relieve inflation pressure and reopen rate cut discussions under incoming Fed Chair Kevin Warsh. The firm expects 2%-2.5% growth with their macro theme of a year of less remaining intact, favoring quality positioning while selectively adding risk where valuations have improved.
Despite significant first quarter headwinds from the Iran war, private credit concerns, and AI skepticism, Sage Advisory maintains that current market disruptions represent temporary inflation shocks rather than fundamental growth derailment, positioning defensively in quality assets while selectively adding risk where valuations have become attractive.
The firm maintains a base case that the Iran war represents more of an inflation shock than a long-lasting growth shock, with the cycle likely dented but not derailed. They expect forward growth in the 2%-2.5% range with risks skewed toward the lower end. The outlook remains constructive for medium-term returns despite near-term challenges.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 7 2026 | 2026 Q1 | - | AI, energy, fixed income, inflation, Iran, private credit, rates | - | Sage Advisory weathered Q1 headwinds from Iran war and private credit stress by positioning defensively in quality assets while selectively adding duration and equity exposure on weakness. They view current disruptions as temporary inflation shocks rather than growth derailment, maintaining constructive medium-term outlook while favoring US markets and defensive credit positioning. |
| Jan 6 2026 | 2025 Q4 | - | credit spreads, duration, Equity, Fed policy, fixed income, healthcare, international, Valuations | - | Sage Advisory maintains cautiously bullish positioning for 2026 with full duration in fixed income expecting two Fed cuts and full equity beta balanced by lower valuation multiples. Strategy emphasizes stability and quality given historically tight credit spreads and elevated equity valuations, while capturing upside from healthy consumer fundamentals and policy tailwinds through selective sector positioning. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
IranThe Iran war has created significant market disruption, driving energy prices from $60s to above $100 for Brent crude, with physical prices exceeding $140. This geopolitical conflict represents the primary risk factor affecting global markets, though managers view it as likely creating more of an inflation shock than a long-lasting growth shock. |
Geopolitical Energy Inflation Conflict Oil |
EnergyEnergy markets experienced extreme volatility with Brent futures rising roughly 50% since the conflict started. Energy-dependent regions like Asia and Europe were disproportionately pressured. The firm maintains exposure to natural-gas-focused energy businesses as part of their defensive positioning strategy. |
Oil Natural Gas Volatility Pricing Supply | |
Private CreditPrivate credit concerns emerged as a significant market headwind alongside the Iran conflict. Business development companies showed particular stress with BDC fixed income down 1% and BDC equities down roughly 10%. The firm has positioned defensively to avoid private credit risk exposure. |
Credit Stress BDC Risk Positioning | |
AIAI margin pressures and rising skepticism around AI investments have contributed to market concerns. However, the firm sees continued opportunities in AI-adjacent industries and notes that productivity gains and spending outside of core AI remain important tailwinds for the economy. |
Margins Productivity Technology Investment | |
RatesFixed income markets interpreted the energy shock as a near-term, supply-driven inflation event, pushing expected Fed easing out of 2026. The 2s10s curve flattened by roughly 20 basis points, with one-year TIPS-implied inflation rising above 5%. The firm sees opportunities to add duration as yields have moved too aggressively. |
Fed Duration Inflation Yield Curve | |
| 2025 Q4 |
PharmaceuticalsHealth care holdings including pharmaceutical and biotechnology companies added meaningfully to returns. Holdings such as Roche, Novartis, and Ionis Pharmaceuticals benefited from new drug approvals, steady and growing earnings, and business models that continue to generate cash through a wide range of economic conditions. |
Pharmaceuticals Biotechnology Healthcare Drug Approvals |
Defense SpendingDefense-related holdings such as BAE Systems and Rheinmetall had been standout performers for much of the year but fell back in Q4. While these businesses currently benefit from secular growth in defense spending around the world, share prices have moved ahead of underlying fundamentals, prompting modest position trimming. |
Defense BAE Systems Rheinmetall Defense Spending | |
TechnologySelected technology-related companies held across several funds contributed for the quarter, particularly established franchises such as Samsung Electronics and Alphabet. While shares soared upward in price during the year, they remain reasonably valued relative to their near-term growth prospects. |
Technology Samsung Alphabet Technology Hardware | |
AIMarket enthusiasm has led to high valuations across most asset categories, particularly publicly traded US equities. The excitement around artificial intelligence and its ability to dramatically impact productivity is cited as a driver of current market exuberance, with historical parallels drawn to internet enthusiasm in the mid-1990s. |
AI Artificial Intelligence Productivity Technology | |
IndustrialsIndustrial holdings were mixed and faced modest headwinds. CNH Industrial detracted across funds, reflecting investors' concerns about the downturn of the agricultural cycle and its impact on end-market demand. CNH remains significantly undervalued in the managers' view, and they are adding to the position opportunistically. |
Industrials CNH Industrial Agriculture Machinery |
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