3 May 2021
Where are we in the Cycle?
Of the five PortfolioDirect cyclical guideposts, one is ‘green’ and four
are flashing ‘amber’. Cyclical conditions have been disproportionately
affected by the unprecedented surge in liquidity from central banks and
accompanying fiscal expansions. Looking ahead, commodity markets are at
risk from an inevitably slowing monetary momentum. An apparent acceleration
in global growth, reflected in forecasts for 2021, will conceal a tendency
for weakening through the course of the year and into 2022. The cyclical
positioning has been characterised as being near a peak and at risk of
moving into a ‘downswing’ phase. More...
Market Directions
A weakening US dollar and unprecedentedly expansionary monetary
conditions have underpinned price strength among a broad array of assets,
including those of industrial and precious metals. Speculative capital flows
connected to retail investors are supporting sector prices and offsetting
the negative effect on mining equities of physical market balances tilting
into surplus due to a slowdown in demand. Heavily hyped energy storage
innovations are stoking interest but remain too far in the future to affect
current metal demand. 1990s style investment performance - when modest
sector equity price gains occurred in the midst of sometimes highly
disruptive macro conditions - remains the underlying theme. More...
Portfolio Performance and Positioning
Phase I companies finished the month posting a small loss, after giving
up a strong start, as the Phase II and Phase III stock categories posted
gains well ahead of the market benchmark. Small gains were made across all
three categories in the past week. Unusually strong money flows and a
general willingness among retail investors to take speculative risks
continue to favour the earliest stage companies. Phase I stocks also offer
uncorrelated returns from discovery opportunities. Phase II companies,
among the riskiest investment options due to their indebtedness, heavy
reliance on execution success and need for strong global economic conditions
to sustain sales, are struggling to match risk adjusted returns elsewhere.
Portfolio models remain biased to the Phase I stock category with cash
positions reflecting the cyclical risks associated with slowing rates of
monetary expansion and output growth.
More...
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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