6 May 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 global growth decelerating, 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
A strong US labour market report for April was accompanied by flagging
equity price momentum. Concerns about global economic growth are catching up
with the mining sector after having been generally shrugged off in prior
weeks. Daily traded metal prices, also hindered by a stronger US dollar,
have fallen with the overall trajectory consistent with a cyclical downswing
having another 10-12 months to run. The performance of the market leaders
is now in greater jeopardy.
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Portfolio Performance and Positioning
Accelerating losses consistent with overall market outcomes were evident
across all three development categories. The market leaders which had been
displaying relative strength lost momentum. The leaders are at greater risk
from further falls in metal prices than other segments which have not
benefited from recent periods cyclical strength and broader equity market
strength. The portfolio remains weighted in favour of Phase I companies in
anticipation of these factors becoming more influential. No changes were
been made to 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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