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 Navigator provides our clients with insight into Anchor’s thoughts on various asset classes and our near-term market outlook.
The global investment landscape remains defined by elevated uncertainty and rapid change. Over the past 12 months or so, we have seen a convergence of geopolitical, political and economic developments. These include renewed trade tensions following the implementation of US President Donald Trump’s Liberation Day tariffs, concerns around an artificial intelligence (AI) valuation bubble, tighter border controls in developed markets (DMs), and South Africa (SA) increasingly finding itself in the US’s cross hairs due to its foreign policy allegiances. Domestically, SA has faced a failed National Budget and ongoing leadership wrangling within the ANC, while globally, geopolitical risks have intensified including the US setting the dangerous precedent of parashooting in to snatch a foreign country’s president, criminal indictment threats against the sitting chair of the US Federal Reserve (Fed), the weaponisation of rare earth minerals, Russia continuing its onslaught on Ukraine (now 1,420 days into Russia’s “three-day special military operation”), the Asad regime in Syria collapsing, and growing international condemnation regarding the humanitarian crisis unfolding in Gaza. At the same time, the Iranian regime appears to be barely hanging on as that country experiences growing anti-government demonstrations. Through all of this, financial markets have handsomely rewarded investors both locally and abroad.
Our point is that there are always reasons to be concerned and reasons to delay investments, yet time and time again, we have seen that being invested and remaining invested has reaped far greater rewards than trying to time the market. Our view remains that one needs an investment plan and strategy, followed by patience to allow this strategy to work its course.
You will see in this document that the momentum propelling global markets is expected to continue. Although prices are high and volatility is likely to remain elevated, it is our assessment that growth in earnings will remain robust. We expect the US interest rate-cutting cycle to continue, which will provide further impetus to investors’ risk appetite.
We are supporters of alternative assets (including hedge funds, protected equity structured products, physical property, etc.) with better defensive characteristics during volatile periods. This is a new asset class for most South Africans, even though it commands a significant share of the investment wallet for family offices abroad. We expect most domestic investors will benefit by increasing their exposure to this asset class over time. As interest rates come down through the rate-cutting cycle, we believe that the attractiveness of alternatives will increase.
Anchor is a proponent of balanced portfolios and diversified risks. We maintain that it is crucial for investors to have a long-term plan for what they seek to achieve with their investments, and we think that the year ahead will likely see them move towards their eventual desired outcome. In our view, this is an excellent time to take a pro-risk stance in your portfolio. We advocate that a healthy portion of your investment portfolio should be offshore to leverage diverse opportunities and return profiles while mitigating SA-specific risk.
We think the current rand exchange rate vs the US dollar is reasonable to externalise a portion of your portfolio. Although we expect the rand to hover around these levels over time, we also find that the investment opportunities abroad are compelling.
The key to successfully managing your wealth is understanding the changes to the world in which we live and adjusting (when necessary) your investment portfolios accordingly. As a boutique asset manager, we can more readily navigate these twists and turns of global developments. Our team of experienced investment professionals is ideally suited to understanding and reacting to a rapidly changing environment as we pursue exceptional investment outcomes for our clients.
