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.
We are delighted to be able to write that South Africa’s (SA) future is looking better than we had expected, with the formation of a Government of National Unity (GNU) ushering in a new era of coalition politics in the country. In Africa, risks often arise when an erstwhile liberation movement looks set to lose power in a particular country. There are many examples of election fraud, manipulation of constitutions, populism, civil wars and coup d’etats across the continent. However, we achieved a peaceful power-sharing agreement in SA in a month. The power-sharing arrangement moves the ruling political party toward the centre of the political spectrum rather than to the left. Many naysayers are discussing the risks of such a coalition arrangement, but that misses the point. Currently, SA is in a much better position than we had expected before the 2024 National and Provincial Elections (NPEs). Our nation’s Constitution proved its mettle.
Much of the knee-jerk relief rally has already taken place. However, it takes time for the benefits from the extension of the long-term visa deadline to be felt, for the improved rail traffic to feed through the system, for improved governance at state-owned enterprises (SOEs) to take hold, etc. We expect that Cabinet meetings will be more transparent and that the discussions in these meetings will be more robust, with new ideas to ignite economic growth being brought to the table. We think that the seeds of a reform agenda have been planted, and we are hopeful that, with time, they will take root.
Investing is a long-term game – think of it as a marathon, not a sprint. Although we are more optimistic about the outlook for domestic assets, the benefits of these changes may take time to feed through to corporate earnings and share prices. The point is that the next five years look better than the past five, and SA should be on your investment radar when constructing your portfolios.
We continue to believe that the bulk of your wealth should be invested abroad and that there are opportunities in all offshore asset classes. Nevertheless, recent robust gains in US equities are making us cautious; still, the momentum is strong, and the projected US earnings growth is high.
We are increasingly proponents of alternative assets (including hedge funds, protected equity structured products, physical property, etc.) with better defensive characteristics if we see a wobble abroad. This asset class is new for most South Africans, even though it commands a significant share of the investment wallet for family offices abroad. We expect most domestic investors to benefit by increasing their exposure to this asset class over time.
Anchor is a proponent of balanced portfolios and diversified risks. We believe it is crucial for investors to 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. 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 expect the rand will continue to hover around current levels vs the US dollar. Therefore, this is an ideal 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 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.
