10 December 2018
Where are we in the Cycle?
None of the five PortfolioDirect cyclical guideposts are turned to
‘green’. The cyclical positioning has been reclassified as ‘downswing’ with
global growth decelerating and less supportive monetary policy settings.
Unusually prolonged supply side constraints which have been offsetting the
effect of weak demand growth are losing their impact as newly initiated
production starts to flow in some metal categories.
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Market Directions
Highly volatile equity prices finished the week on a downswing as
worries about slowing US and global economic growth resurfaced as issues,
adding to pressures from trade policy tensions and fears that the US Federal
Reserve could precipitate a recession in 2019. Metal prices remain on track
for a continuing cyclical downturn. The leading mining stocks continue to
hold up relatively well but the gap with the far more numerous smaller end
of the sector is widening as the effects of risk aversion intensify.
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Portfolio Performance and Positioning
Large losses outside the market leaders have been widespread with the
weakness evident in the portfolio results, with a large majority of stocks
declining. Phase I stocks weakened in the first days of December after
posting a small gain, against the trend of the broader market, in November.
The relatively large weighting in Phase I companies has been retained to
take advantage of their strong leverage to changes in sentiment at the
bottom of the cycle. No changes have been made to the 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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