2 September 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
Day to day volatility in equity prices persisted, dominated once more by
changing news about the progress of trade talks between the USA and China.
Lower yields on US government securities, and worries about the impact of a
negative yield curve on economic activity, also contributed to the rapid
fluctuations in equity prices. Mining sector equity prices finished the
week on the rise but the headline indices for the sector underperformed
broader equity market outcomes. The large fall in the iron ore price during
August stalled, providing a respite for the market leaders. Exploration
stocks benefitted from the continued improvement in the gold price.
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Portfolio Performance and Positioning
Phase III stocks partially recovered lost ground during the week while
posting a loss for August as a whole. Phase I stock returns ran ahead of
those for both Phase II and Phase III companies in August for the second
consecutive month after having underperformed through most of 2019 to date.
The portfolio has an elevated cash position and exposure to Phase I
companies in recognition of the ongoing risk of cyclical weakness in metal
markets. 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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