14 October 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
Reduced risks to global trade flows and positive comments from central
bankers about monetary policy being eased are supporting equity prices, at
least for the time being. The recently appointed head of the International
Monetary Fund foreshadowed a cut back in its near term growth forecasts.
Metal prices have remained relatively strong against the backdrop of
widespread concerns about slowing global growth and, for some, a rising
threat of global recession. Restraints on metal supply have been an
important element in stabilising market balances. Gold prices remain tied
to movements in financial market prices rather than deriving support from
any structural shift in gold demand.
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Portfolio Performance and Positioning
Phase I companies continue to produce relatively strong gains. Phase II
stocks have been lagging the other development categories as they must rely
on execution skills to boost market sentiment without having the broader
equity price support evident among the market leaders or the benefit of
potential exploration successes among Phase I companies. Minor changes to
the portfolio were made to take account of recent relative price movements.
Portfolio models remain tilted toward an exposure to Phase I companies
trading at historically depressed prices.
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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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