17 May 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
accompanying fiscal expansions. Looking ahead, commodity markets are at
risk from an inevitably slowing monetary momentum. An apparent acceleration
in global growth, reflected in forecasts for 2021, will conceal a tendency
for weakening through the course of the year and into 2022. 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 assets,
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
The majority of stocks in the Phase I, Phase II and Phase III
development categories lost ground during the week with losses among Phase
II stocks running slightly ahead of those in the other two categories.
Uranium related stocks have remained relatively strong over the past four
weeks. Unusually strong money flows 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, heavy reliance on execution success and need for
strong global economic conditions to sustain sales, are struggling to match
risk adjusted returns elsewhere. Portfolio models remain biased to the
Phase I stock category with cash positions reflecting the cyclical risks
associated with slowing rates of monetary expansion and output growth.
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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