19 August 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
Recession talk intensified as the US government bond yield curve
inverted and yields on the bonds of major currencies remained negative.
Despite rising anxiety reflected in more equity price volatility, markets
were generally orderly. The equity market mood was improved by comments from
German government officials suggesting a willingness to use fiscal policy to
improve the growth outlook. The headline resource sector equity indices fell
although, once again, the smallest stocks in the sector primarily engaged in
exploration showed greater resilience, albeit after having suffered
unprecedented weakness since of the cyclical peak in sector market
conditions in early 2011.
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Portfolio Performance and Positioning
Phase I stock returns slipped behind those of both Phase II and Phase
III companies in the past week as each of the portfolio segments ran ahead
of the benchmark which is dominated by the two global market leaders and the
companies most susceptible to a generalised equity market sell-off. The
portfolio has an elevated cash position and exposure to Phase I companies in
recognition of the ongoing risk of cyclical weakness in metal markets. 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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