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.
vicissitudes, successive, alternating, or changing phases or conditions, as of life or fortune; ups and downs: They remained friends through the vicissitudes of 40 years. (Dictionary.com)
Patient investors have been tested during 2020 and they have come out ahead through the vicissitudes of the COVID-19 pandemic. The market has been through the lows of March, as we faced the reality of the economic destruction wrought by the lockdowns and general risk aversion to the pandemic. Three months later we spoke about a V-shaped recovery and massive stimulus packages, as central banks around the world became extremely generous to markets in an attempt to buffer the economic contraction.
However, not all of this recovery can be attributed to central banks, though they certainly have lubricated the markets with liquidity. The world was already evolving and many of the trends that were underway have been accelerated. Technology is the way of the future and companies that have used COVID-19 to embrace technology have dominated the brick-and-mortar businesses that have been under lockdown. The age of innovation and technology means that there is a new wave of up-and-coming businesses that will challenge the incumbents. We remain focused on understanding these trends as they develop and on comprehending and analysing the growth prospects of the up-and-coming challengers.
Not all trends that have been accelerated are good. We have been saying for a while that the SA government is running out of money. The lockdown has had a devastating impact on the domestic economy, tax collection, and SA’s fiscal position. The challenges that were pre-COVID, perhaps five years away are now upon us. The time for platitudes and kicking the can down the road is over. We have arrived at the point of making the difficult decisions now or facing a choice between the IMF or a failed state in the near future. It is refreshing to see that the message has been received by government with a firm stand against borrowing more SAA, the first wave of arrests for corruption, and a commitment to cutting the public sector wage bill, even in the face of strike action. We have also seen a tender for 12,000 MW of renewable energy and government finally acting on the spectrum auction that has been in limbo for years. We have seen the government abandon plans to nationalise the SA Reserve Bank and state that prescribed assets are no longer being considered as a solution. Overall, we have seen some strong action to rebuild our nation. Much remains to be done. SA will only recover if government, labour, and the private sector are able to pull together to form a solution.
We are hopeful for our future, but we are also aware of the risks. You will see that we continue to advocate for a balanced investment portfolio, although global equities and domestic bonds remain our asset classes of choice.
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.
