The Navigator – Anchor’s Strategy and Asset Allocation, 3Q21
The Navigator is Anchor’s quarterly review of the major themes affecting markets and gives an overview of our current Strategy and Asset Allocation. Click here for the full document.
The purpose of The Navigator is to provide our clients with insight into Anchor’s thoughts on various asset classes and our near-term market outlook.
South Africa (SA) has continued on its path of Renaissance that we discussed last quarter. The trade balance remains positive, buoying both the currency and tax collection. The sentiment around local politics is less dire, the vaccination drive is underway (albeit slowly), Eskom debt levels are gradually coming down, and the energy reforms went further than we had expected. One does tend to focus on the negatives (of which there were a few) however, overall, this past quarter was a positive one for the long-term trajectory of our country. While sentiment is gradually improving, it is still not at a high enough level to spark the investment that is sorely needed and many corporates that we speak to remain hesitant to invest in long-term capital projects. While we acknowledge that much has been done, we also admit that more remains to be accomplished before SA is able to unlock its true economic potential.
The global environment has been favourable with accommodative monetary policy from all major central banks, higher commodity prices, and positive emerging market (EM) sentiment as we rebound from the COVID-19 crisis of a year ago. As the global unlock gathers pace, we are seeing spikes in both economic growth rates and inflation across the globe. Economists are at pains to decide what inflation is transitory and what is permanent. While we believe that most of the current inflation is clearly transitory, how much is permanent remains to be seen. In this context, we expect that central banks will pare back their support and markets will become more volatile as returns slow a little from those that we saw over the past year. Some of the tailwinds for both investments and for the SA economic rebirth will dissipate. Still, we expect that the momentum is such that both will continue with their positive trajectories.
Looking towards investments, risks are ever-present, and we are cognisant that the shape of the investment landscape is rapidly changing. Often index level returns tell one story, yet a deeper dive into the index constituents tells another, with some really appealing opportunities and attractive companies being available both locally and abroad. In this context, now is the time for active asset management.
We remain proponents of a balanced portfolio and we caution investors to remain diversified across different asset classes. We also advise that if you have not looked at offshore diversification yet, then now is the time to do so.
The key to successful management of your wealth is an ability to understand the changes to the world in which we live and to adjust (when necessary) your investment portfolios accordingly. As a boutique asset manager, we can navigate these twists and turns of global developments more readily and our team of experienced investment professionals are ideally suited to understand and react to a rapidly changing environment as we pursue exceptional investment outcomes for our clients.
For the full report and our views on each asset class, click here.