15 March 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 the
accompanying fiscal expansion. Looking ahead, commodity markets are at risk
from an inevitably slowing monetary momentum, in the absence of greater
support from other factors. Stronger anticipated reported 2021 growth will
conceal a tendency for weakening through the course of the year. 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 asset,
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
Phase II stocks were in catch-up mode after losing ground against stocks
in the other development categories. The Phase I category, buoyed by the
inclusion of uranium development stocks, has continued to outstrip the
sector leaders in Phase III. Improved market liquidity 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 and heavy reliance on
execution success, are struggling to match risk adjusted returns elsewhere.
Portfolio models are biased to the Phase I stock category. Cash positions
were reduced recently to accommodate greater exposure to uranium related
companies and a small number of Phase II companies which had lost ground
against the sector.
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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