8 July 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
U.S. and global markets remained fixated on the likelihood of an
interest rate reduction by the U.S. Federal Reserve. Around the world,
bond yields remained on a downward trajectory suggesting ongoing concerns
about the pace of economic activity despite unexpectedly strong US
employment data for June. Mining stocks faltered slightly during the week
although the principal equity price indices remained near record levels
after a further gain in the iron ore price helped the market leaders
overcome concerns about the global growth trajectory.
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Portfolio Performance and Positioning
Against the trend of recent months, Phase I stocks were relatively
strong in the past week although gains from this segments of the market are
coming from historically low levels leaving absolute prices, as a group,
still near all time low levels. Phase II companies were the weakest of the
three portfolio segments as development risks magnify disadvantageous
cyclical positioning. The portfolio has a lowered Phase III weighting in
anticipation of a negative impact from an ongoing cyclical downturn, with a
correspondingly higher cash position. 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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