10 May 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
accompanying fiscal expansions. Looking ahead, commodity markets are at
risk from an inevitably slowing monetary momentum. An apparent acceleration
in global growth, reflected in forecasts for 2021, will conceal a tendency
for weakening through the course of the year and into 2022. 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 assets,
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
After losing ground in recent weeks, Phase I companies bounced back
although uranium related stocks in both Phase I and Phase II development
categories led the way. Phase II stocks were generally weak. All stocks in
the Phase III development category posted gains. Unusually strong money
flows 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,
heavy reliance on execution success and need for strong global economic
conditions to sustain sales, are struggling to match risk adjusted returns
elsewhere. Portfolio models remain biased to the Phase I stock category
with cash positions reflecting the cyclical risks associated with slowing
rates of monetary expansion and output growth.
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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