Dear Clients & Friends,
We are happy to share with you an update from Sage Rhino Capital LLC for the first quarter of 2026.
Markets
2025 was another strong year for patient investors, ending with a familiar headline: stocks up, again.
The S&P 500 finished the year up 17.88%, capping three straight years of double-digit gains, continuing the trend of mega-cap tech stocks outperforming just about anything else and, once again, trouncing the S&P 500 Equal Weight, which returned a respectable 11.43%1. Mid-caps and Small-caps came in more modestly at 7.50% and 6.02%, respectively1.
International equities were the standouts: Developed ex-U.S. ended up 35.49% and Emerging Markets 24.16%, both helped by a weaker dollar1. Fixed income did its job: the U.S. Aggregate Bond Index finished up a solid 7.20%1.
Gold delivered a knock-out performance, climbing over 60% during the year. Looking ahead, we are constructive on domestic mid-cap and small-cap equities as well as international stocks. Mega-cap U.S. stocks should be approached with caution, given stretched valuations. New capital should be allocated conservatively.
Your performance net of fees is posted to your Sage Rhino client portal.
Liberation Day
This was no straight line, of course. Many of you will remember “Liberation Day” – our shorthand for the early-April sweeping tariff announcement and the violent market reaction that followed.
In the wake of the news, stocks suffered their largest single-day drawdown since the COVID panic in March 2020, with tech hit especially hard. In a matter of days, markets plummeted, wiping out untold billions of equity value.
The media response was entirely predictable: immediate, theatrical, and confidently apocalyptic. Tariffs were framed as an economic death spiral – supply chains shattered, inflation unleashed, recession, and possibly even worse. Trade wars are here, experts predicted. Did we mention 1929? The coverage had a single tone: panic.
Then, reality happened. Markets didn’t collapse. The world didn’t end. Companies adapted. Trade routes adjusted. Policymakers postured, negotiated, recalibrated, and moved on to the next fire. Equities, after a frightening air pocket, did what they have always done over time: they recovered, then climbed. By the end of Q2, the S&P 500 had rallied more than 20% off its April lows; by yearend, it was up nearly 18%.
So, what were the real lessons?
- The headlines are not an investment plan
On April 3rd, we wrote to you plainly: there would be “a lot of noise,” but portfolios were built for this exact environment: diversified, resilient, and positioned to navigate volatility without impulsive reactions. That message wasn’t motivational; it was structural. Diversification is what turns scary days into manageable ones. - The crowd is often most confident right before it’s most wrong
In real time, fear sells. Fear gets clicks. Fear gets booked on TV. But fear is also the most expensive emotion in investing. As we discussed in our Q2 letter, others’ fear can be a gift; it creates dislocations and opportunities, while your own fear is the real liability. April’s panic was a textbook example. The most widely shared certainty (“this is the beginning of something terrible”) turned out to be exactly backward. - Staying invested is the whole game
Around that April selloff, we encouraged clients not to retreat, but to stay disciplined: rebalance where appropriate, harvest losses where possible, and keep the long-term plan intact. This matters because recoveries don’t send invitations. Markets don’t ring a bell at the bottom. By the time the world feels safe again, prices have usually already moved. - “Fog of trade war” means you diversify, then you endure
Earlier in the year, we wrote about the “Fog of (trade) War”: uncertainty, shifting policies, and markets lurching with every new headline – an environment where clarity is scarce and outcomes are unknowable. The answer, then and now, is the same: diversification and discipline, paired with the humility to admit we don’t need to predict the next headline to build long-term wealth.
“Liberation Day” wasn’t important because tariffs are harmless (they’re not), or because markets are invincible (they aren’t). It mattered because it reminded us – again – that the narrative is usually far more dramatic than the outcome, and that the investor’s edge is rarely brilliance.
Your real edge, if you are to have any, is patience, process, and – most critically – staying invested when it feels uncomfortable.
Mr. Market is not your friend
To be clear, we are not Pollyannaish. Over the last several years, market drawdowns, while intense, were generally short-lived. Investors should not assume that will always be the case. There will be periods when markets go down hard and stay down for extended stretches, sometimes for years. That has happened many times before, and it will happen again.
Since we can’t know when, portfolios should always be structured to withstand the possibility of a painful, extended bear market.
In prior letters, we’ve referenced “Mr. Market,” the character Benjamin Graham introduced (and Warren Buffett later popularized) to describe the market’s mood swings. Think of Mr. Market as your only trading partner. It’s just you and him.
Mr. Market shows up every day offering to buy your investments or sell you his, sometimes euphoric and expensive, other times despondent and cheap. His prices are real, but his emotions are not a guide. Like a manic-depressive alcoholic, he may be jolly or despondent – and back again – for hours, days, or even years. There is simply no reliable way to predict his next mood.
The most important part of the metaphor is this: you are not obligated to do business with him. You get to decide when, if ever, his offered price is attractive enough to act.
That’s why the right posture toward Mr. Market is one of strength. You don’t build a plan that depends on his benevolence. You build a plan that assumes he will occasionally be irrational, occasionally cruel, and frequently unhelpful. Then, you structure your finances so you can endure those seasons without being forced into bad decisions.
Approaching Mr. Market from a position of strength means:
- Your portfolio is sufficiently diversified and liquid
- You have enough safe assets that can hold up in difficult periods
- Your leverage and spending are controlled
Our job is not to match Mr. Market’s mood. Our job is to stay disciplined, stay diversified, and engage with him only when it improves your odds, not when it merely relieves your anxiety.
If you fail to approach Mr. Market from a position of strength, you may pay the price – selling at the bottom and interrupting long-term compounding, the ultimate goal.
The strong do what they will; the weak do what they must. Don’t put yourself in a position where Mr. Market tells you what to do.
Thank you for your continued support.
Warmly,
Sage Rhino Capital LLC
1 “Index Dashboard: U.S.,” S&P Dow Jones Indices, December 31, 2025
Sage Rhino Capital, LLC is a Registered Investment Adviser. This report is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Sage Rhino Capital, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Sage Rhino Capital, LLC unless a client service agreement is in place. Account statement from the custodian is the official record of holdings, balances and security values. Sage Rhino Capital does not provide tax advice.