Q1 2024 Quarterly Letter

April 2024

Happy Spring!  This is the season that spurs growth and excitement for things to come.  In that spirit, it gives me great pleasure to introduce the latest “blooms” to the Ratio Wealth Group Team.  

Becky Neils, CFP ®, comes to us from Charles Schwab, where she was a Senior Wealth Advisor.  Becky has almost 25 years of experience at Schwab and will take the lead on your most challenging planning questions.  Working closely with the entire Ratio Team, Becky will help us ensure that your asset allocation strategies are aligned with your specific objectives. 

We also want to introduce Jack Seavall, a Junior Planner that is graduating from the University of Colorado next month.  Jack’s degree from the Leeds School of Business will include participation in the Personal Financial Planning track (PFP). This curriculum is approved by the Certified Financial Planner Board of Standards. Jack has been working with Ratio for three months and is a tremendous addition.  Jack also wrapped up his collegiate athletic career playing under Coach Prime, this past fall.  Feel free to ask Jack about that experience when you meet him.   

With respect to the first three months of the year, the financial landscape included elements of both cautious confidence and economic ambiguity. We continue to evaluate the key macro metrics identified in our last letter (inflation, GDP growth, and valuations to name a few) with respect to asset allocation or planning implications.  Note that we did not make any strategic changes to our core models this quarter.     

Currently, we see a stabilizing economic backdrop.  Key factors include slightly elevated but manageable inflation trends, adequate consumer confidence, calmer financial market conditions, and continued job growth.  These components do support the notion of easing by the Federal Reserve, at some point in the coming months.  However, the rate and degree of these adjustments has become more uncertain.  Early consensus leaned towards the first of potentially three rate cuts, happening in March.  Obviously, that did not occur.  Inflation, while lower and seemingly under control, is still stubbornly above the Fed’s 2.0% target, with housing costs a large contributing factor.  It is our belief that uncertainty related to inflation may cause the Federal Reserve to push any rate cuts towards the back half of the year.   

Such dynamics have led to small year-to-date decreases in the net asset value of bond portfolios, as rates have risen slightly. The impact of improved yields supports longer term fundamentals for fixed income instruments.  Investment grade corporates, and where appropriate, municipal bonds remain an additive, risk-adjusted allocation in diversified portfolios. Our trend of slight increases in fixed income allocations last quarter will continue across some client allocations throughout the year.   

As we indicated in our last quarterly letter, the “Magnificent Seven” (Apple Inc., Microsoft Corp, Amazon.com Inc., NVIDIA Corp., Alphabet Inc., Meta Platforms Inc., and Tesla) were the primary driver for equity index gains during 2023. This group of seven stocks averaged a return of 111% for the year, and the S&P 500 without those seven stocks would have returned only 8%, instead of 26%1.  (Also, please remember that these stocks were down 48% in 2022.)  While we happily participated in 2023 gains, the concentration suggested a lack of widespread economic strength as we entered the new year.

1. David Thomas, “2023 Review – Magnificent Seven Lead Domestic Large Cap Outperformance”, Forbes.com, January 22, 2024, www.forbes.com/sites/greatspeculations/2024/01/22/2023-in-review/.  

    Now, elevated valuations in these mega-corporations are beginning to create some performance divergence as the individual members of the “7” no longer represent a particularly coherent group.  Investor appreciation for business fundamentals has returned, leading to better performance for a broader range of stocks, during the first quarter.  This is an encouraging sign as the sustainability of positive market returns requires broad participation.

    I will remind you that we made some shifts to our core model in the fourth quarter of last year.  We did modify equity allocations from larger corporations to mid and small capitalization stocks on the belief that a recession was avoidable.  So far, this thesis is playing out.  Again, fixed income is worth considering as rates allow for a move down the risk curve, while maintaining target return objectives. 

    As we approach mid-year, the investment landscape will continue to be influenced by not only economic factors but by geopolitical tensions and global events.  Presidential election noise will no doubt create market speculation and investor concern.  We field many questions and listen to a lot of client concerns regarding how the markets react to election results.  The reality is that markets historically have been driven much more by economic cycles than specific election results.  In fact, from 1932 through 2022, the S&P has averaged a 9.9% return during presidential election years2, slightly lower than non-election years, but not a catastrophe.  We expect this will remain true in 2024.  The current economic environment, characterized by moderating inflation and anticipated Fed rate cuts, presents a scenario where the President in 2025, irrespective of party, will inherit a landscape of subdued growth and stable economic conditions.

    Ratio continues to advise clients to focus on long-term economic indicators and market fundamentals, rather than attempting to time investments based on any headlines and political posturing. The resilience of the financial markets suggests that a diversified investment strategy, grounded in a comprehensive understanding of economic trends, remains the most prudent approach.

    We look forward to speaking with each of you soon.  Please do not hesitate to contact me with specific planning needs, in addition to any market inquiries you have.   We continue to take great pride that you allow us to support you in addressing the myriad of financial questions that can arise.   

    With Gratitude,

    Derek   

    _________________________________

    2. Matt Sommer, “Presidential election years like 2024 are usually winners for U.S. stocks”, Morningstar.com, December 16, 2023, www.morningstar.com/news/marketwatch/20231216325/presidential-election-years-like-2024-are-usually-winners-for-us-stocks.

      Disclosure

      Ratio Wealth Group, LLC (RWG) is a registered investment advisor located in Colorado. RWG and its representatives are in compliance with the current filing requirements imposed upon registered investment advisors by those jurisdictions in which RWG maintains clients. RWG may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. RWG’s web site is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment related information, publications, and links. Accordingly, the publication of RWG’s web site on the Internet should not be construed by any consumer and/or prospective client as RWG’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by RWG with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of RWG, please contact the SEC, FINRA or the state securities regulators for those states in which RWG maintains a filing. A copy of RWG’s current written disclosure statement discussing RWG’s business operations, service, and fees is available from RWG upon written request. RWG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to RWG’s web site or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

      Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended or undertaken by RWG) made reference to directly or indirectly by RWG in its web site, or indirectly by a link to an unaffiliated third party web site, will be profitable or equal the corresponding indicated performance level(s). Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client’s investment portfolio. Historical performance results for investment indices and/or categories generally do not reflect the deduction of transaction and/or custodial charges, the deductions of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. Certain portions of RWG’s web site (i.e. newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, RWG’s (and those of other investment and non-investment professionals) positions and/or recommendations of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendations(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from RWG, or form any other investment professional. RWG is neither an attorney nor an accountant, and no portion of the web site content should be interpreted as legal, accounting or tax advice.

      To the extent that any client or prospective client utilizes any economic calculator or similar device contained within or linked to RWG’s web site, the client and/or prospective client acknowledges and understands that the information resulting from the use of any such calculator/device, is not, and should not be construed, in any manner whatsoever, as the receipt of, or a substitute for, personalized individual advice from RWG, or from any other investment professional.

      Shawn Wallace, CLTC
      Managing Director

      720.420.4866 Direct
      shawn@RatioWealthGroup.com

      “The first time I meet with prospective clients I love getting to know them, exchanging life stories and learning about their goals and dreams. The best moment is when they realize that we’re a great fit and that we are the advisors they have been looking for. I like to think my people skills rival my financial skills! At Ratio, I’m proud that everything we do revolves around our client’s plan. Our goal is for them to trust us as their advisor and planning resource for decades to come.“

      Shawn has been a dedicated planning agent for the over seven years, focusing on the comprehensive insurance and investment needs of affluent clients throughout the country. He offers expertise in optimization tactics during the accumulation phase, as well as tax efficient distribution strategies for clients. Shawn also brings a unique perspective and industry knowledge to the table as a United Airlines pilot and Boeing 787 instructor.

      After graduating from Indiana State with a Bachelor’s of Science Degree in Aerospace, Shawn flew for the United States Air Force and is a proud veteran of Desert Storm.

      Work : Life

      Shawn lives in Denver with his wife and two sons and they all love to travel and are avid sports fans. Shawn is also an avid microbrew fan and will happily tell you his favorites. He is also a Board Member of the Wings Over the Rockies Air and Space Museum.

      Nancy Kimball
      Executive Assistant

      720.420.4860 Direct
      Nancy@ratiowealthgroup.com

      “Helping people find happiness in the little things, moments or even daily miracles brings me joy! I thrive to make sure the Team at Ratio is prepared for all of their clients’ needs in and out of the office. Patience, appreciation, research and knowledge are key to my success at Ratio. I love helping our ratio Team thrive every day.”

      Nancy brings a long career in advertising sales where she worked for Blair Television in various cities including New York. She came to Denver where she worked at the NBC News Affiliate, Channel 9. After leaving the Television Industry, Nancy changed career paths to a more administrative supportive role. She worked for mortgage and real estate CEOs and supported various other CEOs as a Consultant. Nancy is well versed in planning, communication and anticipating the needs of the Ratio Team and their clients. She received a Bachelor of Arts in Speech Communication and Broadcasting from Colorado State University. She is also a Certified Yoga Instructor.

      Work : Life
      Outside of Ratio, Nancy enjoys spending time with her husband and cheering her son on during his many sports, especially hockey. Her favorite hobbies are Pilates and playing the piano. She enjoys volunteering wherever she is needed at her son’s school, on her HOA Board in her neighborhood, and serving the homeless in the Denver community.

      Becky Neils, CFP®
      Senior Financial Planner

      720.420.4862
      becky@ratiowealthgroup.com

      “You come first. Everything I do is meant to help you understand your overall financial picture and help you toward your goals. I want to get to know you and understand what is important to you. Our planning discussions will be all about how to make your individual plan work to get to your goals, whatever they may be. Listening is the key, but so is explaining complex financial concepts in a way that makes things understandable. “

      Becky comes from a 24 year career at Charles Schwab as a branch partner, and for most of her tenure as Senior Wealth Advisor charged with portfolio management and all aspects of financial planning. Her passion is helping clients and their families with planning topics that include retirement, estate, college, charitable, long term care, debt management, cash flow, tax and any other topics that may come up in life.  Becky holds the CFP designation and is a member of the FPA of Colorado.  She holds a Masters degree from the University of Colorado.

      Work : Life

      Becky prioritizes spending time with her husband and daughter. They love hiking, biking and almost anything outdoors. She also loves photography and travel.

      Lauren S. Young, CFP® Vice President, Client Advisor

      720.420.4873 Direct
      lauren@RatioWealthGroup.com

      “I’m passionate about helping people determine their financial goals and then working with them to make sure they can achieve them. I enjoy helping our clients understand “financial language” so that they feel confident when making financial decisions. An important role I play is reminding clients of their goals and helping them stick with them. The difference between us and other financial advisors is our focus on getting to know our clients and connecting with them. That’s as important to us as performance results.”

      Lauren has earned a Certified Financial Planner™ designation and has been working in Wealth Management industry for nearly 15 years. She has extensive experience in trust administration, estate planning, retirement planning, and education planning. She has a degree in Business Administration with concentrations in Marketing and Finance from Gonzaga University.

      Lauren also created a Kids and Money workshop and is passionate about empowering teenagers with the knowledge and expertise to create their own financial futures.

      Work : Life
      Lauren is a sports fanatic and loves to ski, bike, go to the mountains, cheer on the Denver Broncos and Colorado Avalanche and spend time with her husband and two kids.

      Josh Freedman, CFA
      Chief Operating Officer

      720.420.4863 Direct
      josh@ratiowealthgroup.com

      “After 30 years in the finance industry, I have seen many different investment strategies employed by multiple firms.  I am thrilled to be at Ratio Wealth Group because I believe that the firm’s holistic approach, our investment philosophy, and the services we provide are the best way to ensure our clients’ financial well-being and peace of mind.  It gives me great pleasure and satisfaction to work with such talented people – both coworkers and clients.”

      Josh has worked in just about every aspect of the asset management business – from trading and securities research to compliance and operations. Before joining Ratio Wealth Group, Josh was Chief Operating Officer and Chief Compliance Officer for several independent investment advisors, most recently Ballast Equity Management, LLC. He has experience in investment research and portfolio management in both the equity and fixed income markets and began his career in client service and sales and marketing.

      Josh holds a Bachelor of Business Administration degree from the University of San Diego and a Masters in Business Administration, with a specialization in Finance, from the University of Denver. Josh is a CFA charterholder and a member of the CFA Institute and CFA Society Colorado.

      Work : Life
      Josh and his wife enjoy traveling and being in the mountains to ski, ride and hike whenever they can. Josh is also a dedicated, if slow, swimmer and runner. His favorite pastime is annoying his grown sons with the worst dad jokes he can find.

      Dominique Caraveo
      Client Relations Manager

      720.420.4867 Direct
      dominique@RatioWealthGroup.com

      “Money is an incredibly vulnerable subject. At Ratio, money can be discussed without fear of judgement or pressure all within a space that ensures trust and care. As a first-generation college graduate, I have learned what it’s like to not have been provided with the tools to make yourself financially successful until much later in life. At Ratio, financial advice is coupled with education to ensure that each of our clients has the tools and resources to write their own financial story.”

      Dominique focuses on client relations management at Ratio Wealth Group. She has 5 years of client service experience helping clients navigate their financial planning needs. Dominique holds a B.A. in Liberal Arts and an M.S. in Marketing both from Regis University.

      Work : Life
      During her free time, Dominique enjoys playing tennis, pickle ball, cooking and spending time with her family.

      Darren Spreeuw, PhD
      Portfolio Manager

      720.420.4879 Direct
      darren@RatioWealthGroup.com

      “I am an educator at heart. I love talking with clients about the economic theories that underlie financial markets, and helping to clarify their understanding about how things work. I’m also a musician, and a little known fact about me is that I pick up foreign languages easily – accents and all. I’m proud to work at Ratio because we are a true fiduciary, putting our clients first, while practicing and promoting best ethical practices with kindness, empathy, and respect.”

      Darren has approached the capital markets from a myriad of angles over the last 22 years. At Ratio Wealth Group, he focuses on portfolio management, portfolio analytics, planning integration and client relations. He works closely with the entire Ratio team to insure complimentary investment strategies are thoughtfully integrated into tailored financial plans.

      As an academic economist, Darren taught graduate level econometrics, finance and economic theory at several universities, and conducted firm-theory research in Eastern Europe as a Fulbright Scholar. In the private sector, Darren has provided thoughtful strategic analysis to a range of firms, from small family offices and RIAs, to big-data firms overseeing portfolios of mortgage-backed securities.

      Darren is a Founding Executive Board Member of the Colorado Student Leader’s Institute, an affiliate of The National Conference of Governor Schools. He holds degrees from San Francisco State University (BA Econ) and The American University (PhD Econ).

      Work : Life

      Outside of the office, you’ll find Darren fixing anything that breaks at one of his many rental properties, cheering on his kids’ soccer teams, skiing, climbing, cycling, and playing beer-league hockey.

      Beth Steininger Wraga
      Managing Director

      720.420.4865 Direct
      beth@ratiowealthgroup.com

      “I believe that taking a holistic approach to your financial well-being paves the way to a life abundant in success, happiness and meaning. I have a deep background working with financial institutions and a strong desire to serve others with empathy and integrity. This combination gives me an ideal foundation to aid individuals and families in planning and achieving their life goals.”

      Beth brings twenty-five years of institutional financial services experience in sales, research, and operations to her role as Managing Director. Prior to Ratio Wealth Group, Beth worked as the Director of Investor Relations and Marketing for two different hedge fund advisors that were focused on the technology, media, and telecom sectors in the public and private markets. Previously, she worked for Goldman Sachs as a Vice President in Institutional Equity Research Sales and in the Global Investment Research Technology Group. She also worked at Paine Webber (now UBS) in Investment Research and started her career in its Management Audit and Controls analyst program. In addition, Beth is a Certified Life Coach – she uses this training and passion to help clients identify core motivations, values, and goals in their wealth management discussion. Beth received her Bachelor of Business Administration from the University of Texas at Austin.

      Work : Life

      Beth lives in San Francisco with her husband and three sons. She is passionate about travel, theater and cheering on her boys.

      Graham C. Gerlach, CFP®, AEP®
      Co-Founder, Owner, Partner

      720.420.4871
      Graham@RatioWealthGroup.com

      Graham brings a varied and highly valuable combination of expertise to Ratio Wealth Group, advising on all aspect of our business. Graham is also a Co-Founder and Chief Revenue Officer of Inclined Technologies, a SaaS software company focused on driving better long-term outcomes for whole life policyholders.

      Graham holds a (BA) from Denison University (Religion and Psychology) and is a member of the Denver Estate Planning Counsel.

      Work : Life
      Outside the office, you’ll find Graham enjoying American and European Football, cooking outside and fine tuning esoteric knock-knock jokes with his kids.

      Derek J. Scarth
      Co-Founder, Owner, Managing Partner

      720.420.4872 Direct
      derek@RatioWealthGroup.com

      “I am incredibly grateful to assist families in developing a thoughtful strategy for their specific needs and imparting trusted advice. I truly subscribe to a life in service for others. At Ratio, we take a team approach to caring for our clients. I want individuals and families to know that we take tremendous pride in providing confidence and harmony around estate and financial objectives. We know that assets are only valuable as part of an prearranged mosaic and are truly dedicated to being a dependable resource at every turn.”

      Derek’s professional experience began in public/private equity analysis and institutional portfolio management. He is well versed in business development and operational management for both for-profit and not-for profit entities. Prior to co-founding Ratio Wealth Group, Derek was a Portfolio Manager and Managing Director for Inspire Capital Partners. Previously, he was a Partner at Denver Investments LLC, where he served as Co-Portfolio Manager for Large-Cap Growth institutional clients and on the Westcore Large-Cap Growth Fund. In 2003, he assisted the investor relations team of Newmont Mining Corporation (NEM -NYSE) in a public offering capital raise. Derek began his investment career as an Analyst and Assistant Portfolio Manager for Berger Funds, which was acquired by Janus Capital Management in 2002.

      Derek received his bachelor’s degree from Regis University and holds a master’s degree from the University of Denver – Daniels College of Business.

      Work : Life

      When he’s not actively engaged in the Ratio community, you will find Derek spending time in the Colorado mountains with his wife and their three sons. Derek is very proud to give back to his alma mater as the Regis University Board of Trustees Chair. He also is an assistant boys soccer coach and mentor at Regis Jesuit High School.

      Disclaimer

      No client or potential client should assume that any information presented should be construed as personalized financial planning or investment advice. Personalized financial planning and investment advice can only be rendered after engagement of the firm for services, execution of the required documentation, and receipt of our disclosure documents which we will provide upon request. For more regulatory information regarding Ratio Wealth Group please visit the SEC’s website at www.adviserinfo.sec.gov

      Licensing

      Investment advisory services offered through Ratio Wealth Group, a Registered Investment Adviser.

      Graham Gerlach CA Insurance License #0C37975, State of Domicile, Colorado
      Shawn Wallace CA Insurance License #0G59657, State of Domicile, Colorado

      Ratio CRD: 6705290