| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Sage Advisory enters 2026 with a cautiously optimistic outlook despite supportive macro fundamentals. The firm expects GDP growth to moderate to 2% while inflation progresses toward target levels, supported by healthy consumer spending and tax bill stimulus. However, historically full valuations and abundant macro risks including AI investment funding needs, private credit stress, and potential fiscal surprises warrant defensive positioning. In fixed income, the team maintains full duration exposure expecting two Fed cuts rather than the three currently priced, favoring agency MBS and financials for stability. Credit risk is kept below benchmarks given tight spreads and changing liquidity conditions. Equity positioning includes full beta exposure but with lower average valuation multiples than broad markets, tactical overweights to healthcare, banks and retail, plus increased international exposure given improving European fundamentals and valuation divergence. The overarching strategy focuses on stability, yield generation, and valuation opportunities as returns are expected to come from earnings growth rather than multiple expansion.
Despite supportive macro backdrop with healthy consumer and policy tailwinds, managers emphasize stability and quality positioning given historically full valuations and abundant macro risks including AI funding needs and private credit stress.
Outlook remains tilted toward bullish side for sentiment and risk assets supported by healthy consumer, tax bill stimulus, and AI spending. GDP growth expected to moderate to solid 2% with inflation remaining sticky but progressing toward 2% target. Returns in 2026 expected to be driven by earnings growth and yield with limited scope for spread tightening and multiple expansion.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 6 2026 | 2025 Q4 | - | credit spreads, duration, Equity, Fed policy, fixed income, healthcare, international, Valuations | - | Fed cuts drove fixed income performance with two cuts in Q4 and three expected in 2026. Current Fed pricing implies three cuts but managers view two as more likely given growth momentum. New Fed leadership may provide dovish boost mid-year. AI valuation concerns emerged as a risk factor during Q4. AI investment progression and subsequent funding needs identified as key macro risk for 2026 with potential to impact both fixed income and equity valuations. Private credit cracks identified as macro risk for 2026. Liquidity conditions changing with less liquid markets like private credit showing stress. Managers note reduced liquidity as evidenced by global central bank pivot toward tightening. Value outperformed growth in Q4 (+3% vs +2.2%) breaking year-long trends. Managers positioning with lower average valuation multiples than broad market and focusing on valuation opportunities including healthcare, banks, and retail sectors. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
Private CreditThe space has become very popular with lots of LP money chasing returns. Some sponsors have paid extremely high prices and lent on unfavorable terms. Many have also lent into the AI/data-center space to businesses with questionable futures. |
Credit Lending Risk | |
RatesFederal Reserve resumed rate-cutting cycle with first cut since December 2024, signaling resumption of easing. Expected three cuts of 25bps between now and first quarter 2026 as Fed responds to signs of weakness in US labor market. |
Fed Monetary Policy Labor Market Easing Liquidity | |
ValueManager emphasizes investing in controlled companies trading at significant discounts to NAV, with European holding companies showing discounts of 30-68%. The strategy focuses on securities mispricing where real value exists, contrasting with overvalued technology stocks. |
Discounts NAV Mispricing Undervalued Controlled |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
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| TICKER | COMMENTARY |
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