18 November 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 indices again pushed to record levels although
smaller stocks have lagged the larger end of the market. Market volatility
has remained low, signaling little anxiety about valuations or the potential
impact of external events. The mining sector did not participate in the
generally stronger equity market conditions. Industrial metal prices were
generally lower during the week. Metal prices continue to signal a subdued
growth picture but not a dramatic downturn. Gold prices remain dominated by
the direction of bond yields.
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Portfolio Performance and Positioning
Stock prices generally reflected weaker commodity market conditions. A
positive outcome for the Phase II segment reflected some isolated recoveries
from previously weaker conditions. Overall, the number of declining prices
was more than double the number of appreciating stock prices. Several Phase
I stocks which had been firming in price gave up gains as sector prices have
generally weakened . No changes have been made to portfolio models which
remain biased to the Phase I stock category. Phase I stocks are likely to
show less leverage to cyclical weakness since they are starting from already
historically low price levels.
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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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