11 November 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 prices were propelled higher through the week by reassurances
over a pending solution to the US-China trade dispute and expected support
from central banks. US corporate earnings reports also contributed. Higher
bond yields, at least for the present, are being interpreted as a sign of
improved global growth conditions and beneficial for equities despite a
theoretically negative impact on valuations. Mining equity prices were
helped to higher levels by the broad based strength in equity prices despite
mixed commodity price outcomes. Higher bond yields negatively impacted gold
prices.
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Portfolio Performance and Positioning
A clear majority of stocks in each development phase moved higher in the
past week although net gains were modest and less than the benchmark
change. The largest stocks continue to be the main beneficiaries of general
equity market strength and, as a consequence, are most leveraged to future
weakness. Other parts of the sector remain historically weak having failed
to participate in the most recent market strength. No further changes have
been made to portfolio models which remain biased to the Phase I stock
category.
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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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