1 July 2019
Where are we in the Cycle?
Of the five PortfolioDirect cyclical guideposts, two are ‘red’ and three
‘amber’. The cyclical positioning has been classified as ‘downswing’ with
decelerating global growth forcing a negative change to expectations, a loss
of output momentum in China, the largest national user of metal, and less
supportive monetary policy settings than have prevailed for most of the
post-2009 period.
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Market Directions
The USA and China appear to have put off an escalation in the trade
conflict with rescheduled talks due to commence during July. Mining sector
stocks made gains despite the broader market treading water, albeit near
record levels for the S&P 500. The strength of the iron ore price was an
important contributor to the performance of the mining market leaders and,
consequently, the headline market indices. The share prices of the bulk of
the sector continued to languish near historically low levels. Falling bond
yields and lowered interest rate expectations have helped push the gold
price to the highest level in six years.
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Portfolio Performance and Positioning
The portfolio returns have been dominated for the past month at least by
the impact on the market leaders of broader equity market conditions and
higher iron ore prices. Exploration oriented companies have continued to lag
with a succession of negative monthly returns. Phase II companies finished
the month near breakeven. The portfolio has a lowered Phase III weighting
in anticipation of a negative impact from an ongoing cyclical downturn, with
a correspondingly higher cash position. No changes were been made to
portfolio models.
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Stock Reviews and Rating Analysis
PortfolioDirect rating reports analyse the quality and risk
attributes of proposed mineral developments. Rating criteria apply to mining and oil and gas stocks at any stage of
development. PortfolioDirect uses a five point rating
scale to measure the risk adjusted quality of proposed mineral developments
or companies.
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The 'Steak or Sizzle' blog provides summary judgements on
the top performing ASX-listed resources stocks.
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