19 September 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
A strongly positive tone returned to the equity market as tensions over
global trade and monetary conditions both eased. The rising yields on
longer dated government securities buoyed the financial sector earnings
outlook, helping sustain the broader market. Lower government bond yields
impacted gold prices which turned lower just as they had risen when yields
were falling. Lowered trade disruption risk perceptions added strength to
metal market prices although the strong nickel price rise of recent weeks
stalled. The apparent contradiction between movements in bond yields and
copper prices in recent weeks was partially reconciled with the reversal in
bond prices.
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Portfolio Performance and Positioning
Phase I companies continued to produce the relatively strong gains
evident over the past three months. The Phase II negative return for the
week was due to the write-down of two investments which were being carried
at their last traded prices but which face possibly insurmountable odds in
trading again. Three new Phase II stocks covering oil and gas, graphite and
zinc developments were added to the portfolio. The Atrum Coal position was
trimmed after strong recent performance led to a high weighting.
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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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