2023-First Half of Year Alpha Principle Quarterly Update

We are pleased to present you with our very first quarterly update letter. Going forward, you can expect this update towards the beginning of each quarter, which will contain stock market and economic commentary, insight into various financial planning topics, and relevant Alpha Principle updates.

Executive Summary

  • Cooling inflation and greater confidence in a “soft landing” from Federal Reserve activity has bolstered stock markets—any evidence towards a “hard landing” could spark substantial volatility
  • A substantial amount of 2023’s positive stock market performance has been top heavy, led by several companies and sectors
  • Maintaining a healthy cash/cash-equivalents reserve is imperative
  • Diversified portfolios remain the best approach to facing future uncertainties

Prior Quarter Market Commentary

2023 has, so far, been a different environment than what we experienced in the first half of 2022. The graphic below illustrates the dynamic shift:

Alpha Principle Quarterly Update

Inflation has begun to cool, economic growth appears strong, and fears of a severe recession are largely in the rearview mirror. Most asset classes have enjoyed positive performance, excepting commodities and Chinese securities. A substantial percentage of stock market growth has been driven by technology stocks, with five specific stocks in the driver’s seat. The traditional S&P 500 index returned 9.7% as of June 1st but would have only been up 1.5% without Alphabet (Google), Amazon, Apple, Microsoft, and Nvidia. For reference, the S&P 500 equal weighted sector index was negative over the same period.

Alpha Principle’s globally diversified strategies have lagged relevant benchmarks precisely due to this phenomenon, which we are comfortable with in such environments. Investors are, understandably, excited about the impact of AI advancements, with Nvidia (up 195.5% as of June 30th) being the primary benefactor of this enthusiasm. The company is maintaining a Price to Earnings Ratio (PE Ratio—the traditional method of determining how “expensive” owning shares of a company is) well above 200. The S&P 500’s long-term average PE Ratio is around 16, and while it is not abnormal for companies to have a high PE ratio for some period of time, growth and earnings need to ultimately justify the stock price. Disappointing results or unexpected events can derail any individual company, leading to sudden and potentially devastating price declines. Index performance driven so strongly by a select few companies could result in higher, undesirable volatility. Alpha Principle’s portfolios are designed specifically to mute the impact any one company can have on your strategy, which sometimes means giving up some degree of a particular company’s stellar performance but more importantly protects our clients from any one company’s collapse.

Additionally, smaller U.S. and non-U.S. companies have continued their lower performance relative to the U.S.’s largest companies. The yield curve remains inverted, with short-term bonds yields being more attractive (both absolutely and relative to risk) than their long-term counterparts. High level asset class performance as of June 30th, 2023, is below:

Alpha Principle Quarterly Update

Financial Planning Applications

Recent stock market volatility, which includes both positive and negative movement, is a good reminder that investors should maintain appropriate cash balances outside of their primary investment portfolios. This includes traditional bond funds, which experienced their worst year ever in 2022. While it is highly unlikely, we will see another dismal year for bonds in the near future, last year’s breakdown of a traditionally ballast asset class is a powerful reminder that all investing includes risks. Depending on your specific financial plan, we recommend an emergency reserve of 6-months to 24-months in FDIC-insured high yield savings accounts, SIPC-insured money market funds, and/or carefully managed SIPC=insured short-term treasury/bond ladders.

Looking Forward

Investors will continue to watch inflation and the Federal Reserve closely. The Fed has indicated at least one more rate hike by year end (another .25% hike was announced on July 27th), which they may hold to despite declining inflation. The degree of economic slowdown incurred to combat inflation will play a large part in determining the stock market’s near-term trajectory, with confidence rising for a “soft landing” scenario. We believe an elusive soft landing (last definitively achieved in the mid-1990s) is currently priced into stock market valuations, and negative developments on this front would likely prove highly negative for stocks and other growth-oriented asset classes.

While large U.S. companies, particularly growth and technology stocks, have continued to be the belle of the ball, Alpha Principle views the valuations and growth potential in other asset classes as highly attractive over the medium to long term. We firmly believe maintaining a globally diversified portfolio is more important than ever in a world with constant uncertainty and that by maintaining some degree of tilts towards companies with value, profitability, and smaller traits will add value over market cap weighted index returns in the long run.

1,2 Graphic & data courtesy of Avantis Investors

Best regards,
The Alpha Principle Investment Committee

Alpha Principle Quarterly Update

Eric Koeplin


Alpha Principle Quarterly Update

John Ramstead


Alpha Principle Quarterly Update

Brian Folkerts, CFP®


Alpha Principle Quarterly Update

RJ Maunton, CFP®


Alpha Principle is fortified by centuries of collective experience, a testament to our proficiency in the diverse facets of wealth management: investing, estate planning, cash flow planning, legacy planning, risk management, and more. We can work closely with all of your legal, tax and estate advisors, delivering a fully integrated approach to managing your wealth. Our services are tailored to reflect your objectives and core values, aiming to enable you to create a meaningful impact and a noble legacy.

What makes us different

We guide each of our clients through a dynamic, highly individualized process.


Our advisors listen intellectually and emotionally. We don’t just learn your financial objectives — we seek to understand your values, worries, and dreams as well. That way, we can craft a plan that allows you to maximize your impact and pursue a greater purpose.


We’ll build a custom solution from the ground up, then tailor our approach to correspond with what you envision your mission and legacy to be.


We adjust your strategy proactively, using our research and experience to stay one step ahead.

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