17 February 2020
Where are we in the Cycle?
Of the five PortfolioDirect cyclical guideposts, two are ‘red’ and three
‘amber’. ‘Trough Entry’ has been retained as the cyclical positioning
classification with lowered global growth expectations, a loss of output
momentum in China, the largest national user of metal, a persistently high
US dollar and less supportive policy settings acting as headwinds to
speedier cyclical progress.
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Market Directions
The overall market picture resembles the late 1990s during which time
modest sector equity price gains occurred in the midst of sometimes highly
disruptive macro conditions and strong headline equity indicators. Global
growth momentum is improving but the balance of near term risks to sector
investment returns remains negative with equity prices in the leading US
market, stoked by favourable monetary policy settings, now overvalued and
the global growth outlook still insufficient to absorb growing mine supplies
to create more buoyant expectations.
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Portfolio Performance and Positioning
Sector losses moderated as fears about the impact of the coronavirus
outbreak in China subsided. Phase II stocks, covering the early development
stage and including those companies most highly leveraged to immediate
global growth prospects, weakened. Phase III stocks, including the sector
leaders, continued to benefit from the flow of funds attracted by broader
equity market gains. Phase I companies made slight gains after recording
relatively large losses in recent weeks. No changes have been made to
portfolio models which remain biased to the Phase I stock category in
anticipation of their leverage to improved global growth momentum.
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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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