17 June 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
Equity prices pushed higher as central bankers around the world re-emphasised
their commitments to support economic activity and boost inflation. Flagging
investment and weak export orders, aggravated by policymakers’ threats to
global supply chains, pose a rising risk for employment and income growth.
Australian mining market leaders have benefitted from generally stronger
equity prices, a surge in iron ore prices and a weakening Australian
dollar. Stocks at the smaller end of the market have been left behind.
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Portfolio Performance and Positioning
The divergence in performance between the largest stocks in the sector
and small mine developers and explorers became more pronounced with the
difference evident in the performance of the stocks selected within the
models. Unusually, the best performing stocks in the past week were from
Phase III and the worst were all from Phase I. The portfolio has a lowered
Phase III weighting in anticipation of a negative impact from an ongoing
cyclical downturn, with a correspondingly higher cash position. 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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