2 December 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
US equity price indices continued to track higher with smaller stocks
joining the upward surge after having lagged through much of 2019. Treasury
yields remained firm, consistent with a more optimistic view of the growth
picture. Stronger bond yields have been putting downward pressure on gold
prices. Metal and mining stock prices have not appreciated in concert with
the broader market. Nor have the market leaders declined although weakness
has been evident through other parts of the sector. The still high US dollar
remains a weight on US dollar denominated commodity prices.
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Portfolio Performance and Positioning
Phase I and Phase II stock prices were sharply lower as jitters over
global growth intensified as China connected trade talk outcomes with US
support for Hong Kong democracy protesters. Partial retracement of strong
Phase I gains in the prior two months also had an effect but the market
continues to downgrade development companies especially where project
approvals were based on more optimistic market outlooks than currently
prevail. No changes have been made to portfolio models which remain biased
to the Phase I stock category. Phase I stocks are likely to show less
leverage to cyclical weakness since they are starting from already
historically low price levels.
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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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