Anchor Capital’s 2023 asset allocation strategy

Anchor Capital's Co-CIO, Nolan Wapenaar, recently discussed the firm's asset allocation strategy for 2023 in an exclusive interview with CNBC Africa. Wapenaar offered insights into the global economic landscape, particularly focusing on the potential for a recession in the United States and South Africa. The key theme of the discussion centered around the contrasting views on the likelihood of a recession and the implications for investment decisions. Here are the key points from the interview: 1. US Economic Outlook: Anchor Capital's stance on the US economy reflects a more optimistic view compared to the prevailing sentiment. While a majority of market participants predict a recession, Wapenaar believes that the US is resilient enough to potentially avoid a severe economic downturn. Factors such as current earnings, positive economic activity, and low unemployment rates contribute to this outlook. Wapenaar anticipates a mild recession if one were to occur, citing the buffering effect of past interest rate hikes. 2. South African Challenges: In contrast to the US outlook, South Africa faces unique challenges that increase the likelihood of a recession. The country's power crisis and geopolitical uncertainties pose significant hurdles to economic growth. Wapenaar acknowledges the tough road ahead for South Africa, projecting negative growth for at least two consecutive quarters. The domestic landscape presents a complex situation with limited room for recovery in the near term. 3. Asset Allocation Strategy: Wapenaar's assessment of the local versus international investment landscape reflects a nuanced approach. While Anchor Capital has historically been bullish on the Rand, a shift in perspective towards a more bearish outlook has influenced their decision-making. The firm sees opportunities in the domestic fixed income market given the high interest rates, but remains cautious about the timing for risk asset exposure. Looking ahead, Anchor Capital is leaning towards international markets for higher earnings potential, especially considering the challenges facing South African equities. Moreover, Wapenaar highlighted the appeal of mid-cap companies on the global stage and identified China as an emerging opportunity. The interview concluded with a discussion on the investment potential in China, emphasizing the attractive valuations amidst regulatory challenges. Wapenaar suggested that while risks remain, the upside potential outweighs the downside, particularly in the context of small to mid-cap companies. Overall, Anchor Capital's asset allocation strategy for 2023 navigates the complex interplay of global economic dynamics, offering a balanced approach to investment decisions amid uncertainty.