5 November 2018
Where are we in the Cycle?
None of the five PortfolioDirect cyclical guideposts are turned to
‘green’. The cyclical positioning has been reclassified as ‘downswing’ with
global growth decelerating and less supportive monetary policy settings.
Unusually prolonged supply side constraints which have been offsetting the
effect of weak demand growth are losing their impact as newly initiated
production starts to flow in some metal categories.
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Market Directions
Mining and oil and gas stocks were caught up in a broader equity market
resurgence after optimistic talk from the Us president about the prospects
for a trade agreement with China. Broader market conditions were also
assisted by favourable quarterly earnings reports. Commodity prices in the
past week were marginally stronger although crude oil prices continued to
tumble amid fears of emerging oversupply. Resources sector stocks have
largely given up gains made over the past year.
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Portfolio Performance and Positioning
Phase I and Phase III stocks made gains during the week. Phase II
companies, typically at critical junctures in their development paths and
most sensitive to changes in current conditions, have tended to perform
least well causing the macro portfolio to underperform the benchmark. The
relatively large weighting in Phase I companies which now have less downside
risk due to having been omitted from the earlier cyclical rally, has been
retained. No changes have been made to the 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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