15 July 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
The main US equity market indices posted new records, as did the
principal global price index, as confidence grew that the US Federal Reserve
would act to support the US equity market. Metal prices are somewhat at odds
with the bond market outlook as their pace of decline has slowed in recent
weeks, intimating an improvement in global growth momentum. Inconsistencies
in the flow of market data imply the need for some realignment of prices
between those which imply more favourable conditions with those intimating
less propitious investment outcomes.
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Portfolio Performance and Positioning
Once again, against the trend of recent months, weekly Phase I stock
returns were relatively strong although gains from this segment of the
market are coming from historically low levels leaving absolute prices, as a
group, still near all time low levels. Phase II companies were again the
weakest of the three portfolio segments as development risks magnify
disadvantageous cyclical positioning. The portfolio has an elevated cash
position in recognition of the ongoing cyclical downturn in metal markets.
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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