The average National Deposit Rate in January 2023 was around 0.30% and, as of December 2023, was still as low as 0.46%, according to the FDIC. In comparison, Save’s S&P 500 Risk-Controlled portfolio produced returns for a 1-year Market Savings program of 9.34%a during 2023.
Market Savings provides you with the safety of an FDIC-insured† deposit, while Save invests on your behalf at no risk to your capital. Save’s S&P 500 Risk-Controlled portfolio is one of several portfolios that we, an SEC-registered adviser, offer.
So how would the S&P 500 Risk-Controlled portfolio have produced a 1-year Market Savings program return of 9.34%a?
Let’s explain:
2023 saw an equity rally, while bonds and commodities struggled. This was good news for equity-focused portfolios (like the S&P 500 Risk-Controlled), and mixed news for multi-asset, diversified portfolios (which generate returns from various asset classes).
For a 1-year Market Savings program initiated December 31, 2022, the S&P 500 Risk-Controlled portfolio would have delivered +9.34%a after fees (and at current interest rates, as of Dec 2023, the same portfolio performance would have produced over 12% for the 1-year program).
As far as “up-years” go, 2023 was nothing special, however.
It’s worth noting that 2023 was only slightly above average for years when the equity market achieved a positive return (which historically happens more than 70% of the time). If you’re a Save customer, the good news is that these “up-years” are the only ones relevant, because investments are made on your behalf with no risk to your initial capital if the market drops.
For context, the average National Deposit Rate in January 2023 was around 0.30%, and as of December 2023, was 0.46%, according to the FDIC.
The following table shows equivalent results for all of our portfolios. Please note that individual customer returns will vary from these values, depending on exact program start dates.
Also note that we show two results:
- Results, after fees, corresponding to a hypothetical program over the 1-year period from 12.31.2022 to 12.31.2023.
- Based on current rates (Dec 2023), after fees. These returns are higher than a year ago (click link for explanation); these returns are shown to provide a fairer comparison against current market rates.
| 1-year Market Savings program 2023 calendar-year return (hypothetical term from 12.31.2022 to 12.31.2023), after fees | Based on actual rates (from Dec. 2022) | Based on current rates (Dec. 2023) |
| S&P 500 Risk-Controlled portfolioa | 9.3% | 12.2% |
| AI-driven, Global Multi-Strategy portfolioa | 4.4% | 5.7% |
| US Macro portfolioa | 3.1% | 3.9% |
| ESG portfolioa | 0.3% | 0.4% |
| Global Diversified Marketsb (Growth/Moderate/Conservative) | 0.0% to 0.6% | 0.0% to 0.8% |
a. All performance is shown after fees. S&P 500 Risk-Controlled portfolio has been live since 2009 and made available to our customers in July 2023; the Global Multi-Strategy portfolio was launched in Nov 2022 and made available during early 2023; the US Macro portfolio was launched in July 2023 and made available to customers shortly after. Year-end dates were chosen to illustrate a hypothetical exact calendar year, and individual customer returns will vary from these values, depending on exact program start dates.
b. The Global Diversified Markets portfolios are all now legacy portfolios and are not currently offered to Save customers. All performance is shown after fees. Year-end dates were chosen to illustrate a hypothetical exact calendar year, and individual customer returns will vary from these values, depending on exact program start dates.
What happened in the markets?
The US equity market finished the year strongly, ending 2023 up around 26%, while government bonds recovered to end the year slightly up (around 2% to 3%), and commodities varied (gold up 13%, oil down -5%).
Notably, while this equity rally sounds significant, it is only a little higher than the average “up-year” – that is, a year when the equity market returned above zero – which accounts for more than 70% of years historically.
Another historic year, and another reason to stay invested
After a 2022 which was significant for negative reasons (specifically, it was one of the worst years in history for a portfolio containing equities and bonds), 2023 threatened to write its own negative headlines: it was on course to be the first time ever that US government bonds lost value for three consecutive calendar years.
Meanwhile on the equities front, the August to October period saw stocks give up a significant portion of their prior year-to-date gains.
In the end the 2023 “Santa rally” came early. Equities and bonds were swept up in a rally that entirely changed the complexion of how 2023 will be remembered: long-term US government bonds rallied nearly 20% in the final two months to end the year slightly up (2-3%), while equities added a further 15% over the same period (ending up around 26%).
What drove the Save portfolio returns?
The S&P 500 Risk-Controlled portfolio – which holds large US stocks while seeking to maintain a stable level of volatility – benefited from the equity market gains.
The AI-driven, Global Multi-Strategy portfolio generated most of its returns from equities, while also generating sizeable returns from its long-short US sectors sub-strategy (most notably from successfully timing its long and short Energy positions, and from periodically going long Tech).
The US Macro portfolio also made gains from equities while, perhaps more notably, also managing to extract gains from bonds (from dynamically adjusting its bond allocation over the year based on macro signals). These gains were partially offset by commodities declining and from the Energy equity sector underperforming macro-based expectations.
The ESG portfolio made gains from equities (particularly in the US) and gold, partially offset by losses from bonds, and from the underperformance from stocks in the solar energy industry – these had previously performed strongly but were out of favor in 2023.
The Global Diversified Markets portfoliosb (Growth/Moderate/Conservative) made gains from equities and corporate bonds, offset by government bonds and commodities (except for the Conservative portfolio, which does not hold commodities). These portfolios utilize momentum measures to determine which assets to overweight (i.e. the ones with a more positive trend) – and while this approach tends to be beneficial in the longer term, it is less suited to the flip-flopping equity and bond markets we had in 2023.
Outlook: will good things come to those who wait?
“The stock market is a device to transfer money from the impatient to the patient” - Warren Buffet.
If there is a big equity market rally in 2024 – which is becoming an increasingly fashionable opinion – the questions become 1) when will it happen, and 2) will there be a drawdown first?
The good news is that with Save’s Market Savings programs, you don’t need to worry about drawdowns – as your initial capital is protected – making it even easier to follow Warren Buffet’s playbook.
At the time of publishing, the S&P 500 has recently eked out new highs. Hedge funds have been buying Tech stocks (which helped drive the market upwards), while retail investors were selling them. Some analysts and commentators have already increased their 2024 equity market forecasts. Plenty are forecasting a 2024 rally, but also expect a drawdown in the interim.
2024 could include a US election (definitely), geopolitical tensions (definitely), a recession (maybe), and some amount of Fed rate cuts (probably). The wide range of analyst forecasts for equity markets like the S&P 500 tend to be driven by diverging views on the impact of each of these factors.
It has been well-documented that an aggressive cutting of rates by the Fed – if it happens – could lead to another euphoric market rally.
Whatever happens with the markets, we hope and expect that our range of portfolios provide plenty of opportunity to generate returns for our customers.
