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.
The first quarter of 2024 was a period of divergence as the US economy soldiered ever on impervious to higher interest rates and in defiance of economists forecasting a slowdown. In contrast, China’s economy continues to wrestle with a beleaguered property sector, making its 5% gross domestic product (GDP) growth target for 2024 seem more aspirational than achievable. Europe is at least behaving as economists might expect, and a gradual slowdown is spurring interest rate cut expectations. In South Africa (SA), we are seeing a diminished drag from loadshedding as domestic solar production reduces pressure on the grid. Most are taking a wait-and-see approach to the upcoming National and Provincial Elections, while economists are discussing a GDP growth rebound towards 1.2% and 1.6% this year and in 2025.
A fractious global geopolitical environment has resulted in a pivot toward holding gold as a hedge. Authoritarian regimes have seen how Russia’s US dollar reserves were seized in response to its invasion of Ukraine. The unexpected outcome is that these regimes have been down-weighting their US dollar reserves to hold gold reserves instead. Perhaps gold is regaining its lustre as it sets new record-high prices. Gold might be the tailwind that the South African economy needs. Expectations for global interest rate cuts have been pushed out, and the market now forecasts three US rate cuts in 2024, with the rest being pushed into next year.
Anchor believes domestic shares are poised for a catch-up rally after lagging over the past quarter (1Q24). We think prices are overly depressed and that a modest upturn in the domestic outlook and a middle-of-the-road election outcome could spark a catch-up rally for JSE-listed counters. We maintain the view that we are in a global economic boom (centered around the US) and that while equities have run hard, they have more room to grow.
Anchor is a proponent of balanced portfolios and diversified risks. We believe investors should have a long-term plan for what they seek to achieve with their investments and 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 and structured products and alternatives are valuable tools for achieving your desired outcomes. We advocate that a healthy portion of your investment portfolio should be offshore to take advantage of different opportunities and return profiles while diversifying SA-specific risk. We expect the rand will continue to gravitate around current levels vs the US dollar. Therefore, this is an excellent time to externalise a portion of your portfolio if you have not already done so.
Overall, it is also a good time to upweight your investments. Anchor strives to help you achieve the best outcomes within your risk tolerances and investment objectives. We see opportunities in all asset classes, and this document highlights some of the best opportunities we believe to be available.
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 navigate these twists and turns of global developments more readily. 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.
