Cayside Review: 2023 Q1
Our quarterly newsletter including 1st quarter review, global market update and outlook, key numbers, and announcements .
2023 Review & Outlook
US Equity Markets recovered from a disappointing 2022 with a +7.5% return (S&P 500) and +0.9% (Dow Jones Industrial Average) in the first quarter of 2023. Wide performance dispersion across US Equity Markets was largely due to strongly performing technology sectors and pressures on the banking sector.
We continue to remain highly selective in US equity markets with a preference for high-quality businesses in both growth and value sectors while seeking to avoid companies with lower quality earnings or lack of pricing power. In Fixed Income, we are focusing on liquidity with a preference for U.S. Treasury Bills and minimizing exposure to duration risk. While we expect volatility in capital markets to remain heightened in the short-term, we believe there will be significant long term investment opportunities in megatrends of digital and artificial intelligence advancements, healthcare innovation, energy solutions, and in certain real (hard) asset classes.
If credit conditions worsen, we expect to see more defaults across higher leveraged and poorly capitalized businesses which could create opportunities in credit, distressed situations and alternative investments. As we navigate through this late cycle environment, we are highly focused on quality income, liquidity, and businesses with strong earnings power to protect against inflation.
1st Quarter Global Market Performance (data as of 3/31/2023)
2023 Key Numbers
The SECURE 2.0 Act is now law. The legislation provides a slate of changes that could help strengthen the retirement system—and Americans' financial readiness for retirement.
Annual Gift Tax Exclusion: The exclusion will be $17,000 per recipient for 2023
Estate and Gift Tax Exemption: $12.92 million per individual for 2023 gifts and deaths, up from $12.06 million in 2022. This increase means that a married couple can shield a total of $25.84 million without having to pay any federal estate or gift tax. For a couple who has already maxed out lifetime gifts, this means that they may now give away another $1.72 million in 2023.
New Required Minimum Distribution (RMB) Start Date: Individuals turning age 72 during 2023 or later will start their RMD at age 73. For those reaching age 74 after December 31, 2032, their start date is age 75. For those able to defer their RMD to these later birthdays, retirement savings may continue to compound earnings tax deferred or tax exempt in the case of inherited Roth IRAs.
Catch-up Contributions: Individuals over age 50 can contribute a salary reduction catch-up contribution to an employer plan. This contribution is currently limited to $6,500 annually. For tax years beginning after 2024, employees who are 60-63 years old can take advantage of a higher catch-up contribution of $10,000. SECURE 2.0 provisions also index the IRA catch-up contribution for individuals over age 50. The current catch-up amount is $1,000, but this amount will increase for cost-of-living adjustments in tax years beginning after 2023.
Please do not hesitate to reach out to us for a full report on the SECURE 2.0 Act and how it may impact you and your family.
Important Considerations
Choosing High-Quality Custodians
The banking stress in March served as a reminder of the importance of understanding how and where a client’s assets are held in custody. Additionally, there is an increased focus on working with prudent, aligned and well-capitalized custodians and financial institutions.
At Cayside Partners, we wanted to share information on the topic to continually educate ourselves and our clients.
When evaluating a custodian or financial institution, we evaluate the firm’s integrity, business model and how it earns revenue. We look for long-standing businesses that have excellent service, technology, alignment of ownership and minimal exposure to unsound lending and balance sheet practices.
Why we choose Fidelity as our primary custodian:
Founded in 1946 by Edward Johnson II, Fidelity Investments, is an American multinational financial services corporation based in Boston, Massachusetts. The company is one of the largest asset managers in the world with $3.9 trillion in assets under management as of December 2022 [1] . Fidelity Investments operates a brokerage firm, manages a large family of mutual funds, provides fund distribution and investment advice, retirement services, index funds, wealth management, securities execution and clearance, asset custody, and life insurance.
Privately held, Fidelity is still controlled by the Johnson family under Abigail Johnson’s leadership. A benefit of being family-ran and privately held is that the management team is less likely to be persuaded by publicly managing and announcing quarterly statements which can incentivize short-term thinking over long term vision. The ownership is comprised mostly of the Johnson family, employees and ex-employees which provides alignment with investors and clients.
We continue to objectively monitor and conduct due diligence on all of our partner firm’s financial stability and regulatory compliance. In addition, we find comfort in the freedom to choose from the best partners and institutions to provide the highest quality offering to our families and clients.
Source: [1] 2022 Fidelity Investment Annual Report
Business Update & Personnel News
Welcome Baby Strunk!
We are excited to add another “future analyst” to the Cayside Partners team. Tanner Bennett Strunk was born March 21st. Congratulations TJ and Liz!
The first quarter was a very busy one for the Cayside team. We have successfully launched our website (www.caysidepartners.com) and LinkedIn page https://www.linkedin.com/company/cayside-partners/. We have completed a major renovation of the office. We are excited for you to see our new and improved conference room and client lounge. We have built out our proprietary research models and portfolio management tools. Most importantly, we have been actively communicating with clients during a volatile period. We are extremely happy and appreciative of the support we have received from all of you.
Our client onboarding team at Fidelity, Interactive Brokers and Black Diamond has made the transition for clients extremely smooth. The reception we are receiving from all of you regarding our online client portals and our client service interface has been a great success. We are constantly improving our ability to provide transparent and real-time reporting for clients in addition to delivering a very tailored approach for the management of assets. We believe our boutique investment management and independent advisory business model will set us apart by creating a more adaptable, reachable, and client-centric focus.
Contact Us
Please do not hesitate to reach out to us with questions or comments. You can reach us directly here.
Disclosures:
Cayside Partners, LLC ("Cayside") makes no warranty as to the accuracy or completeness of any data herein. Information presented in this report is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Past performance is not indicative of future results. This report is intended for the recipient(s) only and not for further distribution without written consent.