10 June 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
Equity markets reversed earlier losses during the week despite global
growth concerns, monetary policy uncertainty and unresolved trade disputes.
Lower than expected US employment gains in May helped solidify expectations
of interest rates cuts by the Federal Reserve. Despite the nature of the
growth outlook, headline resource sector equity price indicators are proving
resilient largely as a consequence of stronger iron ore prices which are
bucking the trend among industrial metals. Gold prices benefitted from
rising bond prices. .
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Portfolio Performance and Positioning
All classes of stock lost ground in the past week with little
differences across the key development stages. Phase I stock prices, as a
group, were firmer than they had been over the prior two months but the
dispersion in returns meant that they featured among the strongest and
weakest returns in the models. Exploration exposure remains unpopular among
investors. 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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