8 March 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, in the absence of greater
support from other factors. Stronger anticipated reported 2021 growth 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 asset,
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
Phase I stocks were relatively strong while stocks in other development
categories lost significant ground. The performance of early stage uranium
related investments stood out as a source of sector support. 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 and heavy reliance on execution success, are struggling to
match risk adjusted returns elsewhere. They were especially weak in the
past week. Portfolio models are biased to the Phase I stock category. Cash
positions were reduced recently to accommodate greater exposure to uranium
related companies and a small number of Phase II companies which had lost
ground against the sector.
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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