The following presentation outlines the current economic conditions, monetary policy response and valuations, as well as how Sage is positioned in the current environment.

This one-page report details what contributed to and detracted from performance for the Sage Income ETF Strategies in the first quarter. Given the extreme stress in credit markets, the Multi-Asset Income Strategy produced a negative return, with high-yield corporates, municipal bonds, and equities acting as the largest detractors. The portfolio recovered some performance near the end of the quarter due to policy stimulus. The TAMAI strategy underperformed during the first quarter as equities, credit, and municipals all sold off; however, we believe that for longer-term investors, municipals are trading at the most attractive valuations they’ve seen in several years.

This one-page report details what contributed to and detracted from performance for the Sage Tactical ETF Strategies in the first quarter. The equity allocation posted a negative quarter along with the selloff in global risk assets. All regions and sectors detracted from performance as investors de-risked across the board. Given the extreme stress in credit markets, the fixed income allocation underperformed its broad aggregate benchmark, with high yield, emerging market debt, and high-yield municipals acting as the largest detractors. Treasuries, TIPS, and MBS were small positive contributors in the quarter.

The first quarter will be long remembered for the alarming rise of COVID-19 outside China into the developed world and how fears of a global pandemic turned into reality. Supply chain interruptions, border closings, and social distancing measures effectively shut down a large portion of the global economy. This resulted in equities and yields falling sharply as markets rapidly priced in a global recession. Equity and fixed income markets saw an improvement in returns and liquidity toward the end of Q1 due to fiscal and monetary policy initiatives; however, given continued uncertainty and macro risks, we have a lower-beta tilt within equities with a greater allocation to defensive-oriented sectors and a focus on quality. Within fixed income, we believe returns will be driven by spread tightening and relative value opportunities.

Given the shutdown in economies across the globe, the oil shock, and credit crunch, the base case economic outlook has rapidly shifted to include a period of negative growth in the U.S. and at least a short (two-quarter) global recession.

Our base case includes a scenario in which markets continue to be volatile due to virus spread uncertainty, the economic impact, and the evolving policy response; this makes it challenging to gauge a fundamental bottom. The following presentation outlines the current economic conditions, monetary policy response, and valuations, as well as how Sage is positioned in the current environment.

While the fears surrounding the coronavirus have weighed on sentiment and markets, improving fundamentals and highly supportive monetary policy continue to underpin risk assets.