5 April 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 the
accompanying fiscal expansion. Looking ahead, commodity markets are at risk
from an inevitably slowing monetary momentum. Annual growth forecasts for
2021 will conceal a tendency for weakening through the course of the year.
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
The Phase I stock category lost ground in the latter part of March as
some of the strongest performing companies gave up parts of their prior
gains. Both Phase I and Phase II companies lagged the positive performance
of the market leaders in the past week. Improved market liquidity 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 are biased to the Phase I stock category. Cash positions
have been rebuilt recently after exposures to uranium related companies were
trimmed following a period of strong price gains.
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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