4 November 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
Equity prices pushed higher taking the broader US market to record
levels, helped by supportive September quarter earnings results. Markets
seem to have shrugged off worries about trade restrictions amidst growing
confidence that central banks are also backing equity prices through more
accommodating monetary policies. Higher bond yields have coincided with
stronger base metal prices, suggesting some greater confidence about the
global growth outlook.
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Portfolio Performance and Positioning
Phase III companies made unusually strong gains as broader financial and
equity markets took on more risk as some macro risk factors became less
prominent. The sector gains were focused on the largest stocks, rather than
those with valuations most leveraged to improved economic conditions. The
flow of funds effect resulted in Phase I and Phase II stocks losing ground.
Phase II stocks, in the process of trying to expand production, have been
consistent laggards in recent months, displaying neither institutional
interest nor discovery surprise while remaining at risk of being unable to
meet production targets. No changes were made to the portfolio models which
remain tilted toward an exposure to Phase I companies trading at
historically depressed prices.
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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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