7 October 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
The monthly US labour report stalled the build-up of negative momentum.
The fresh data was strong enough to comfort investors about the outlook for
household income and the course of company earnings but not so strong as to
endanger one or more further cuts in interest rates by a US central bank
worried about global economic risks. Within the resources sector, prices
continued to take their direction from the broader market. Daily traded
nonferrous metal prices generally held firm during the week still leaving
them at odds with signs of deteriorating global growth conditions. The
upward momentum of gold prices was hampered by the pattern of bond yield
movements.
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Portfolio Performance and Positioning
Phase I companies continued to produce the relatively strong gains
evident over the past three months although the weakest returns were also
from among this group. Phase II stocks are lacking exposure to improving
metal market conditions, which remain at the mercy of global financial
markets, without the offsetting benefit of potential exploration interest
among Phase I companies. Phase III stocks remain highly correlated to
broader market conditions. No additional changes were made to 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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