19 October 2020
Where are we in the Cycle?
Of the five PortfolioDirect cyclical guideposts, two are ‘red’, two are
‘amber’ and one is green. ‘Trough Entry’ has been retained as the
description of the cyclical positioning with ongoing downside risk to global
growth expectations and a metal price term structure signaling abundant
supplies. China’s improved growth momentum leaves the economy with ample
excess capacity and relying increasingly on recovery in other countries to
close the output gap and maintain growth momentum. Recent US dollar
weakness is helpful but remains subject to reduced COVID-19 infections
around the world. Unprecedented support from global monetary conditions is
the source of the single positive cyclical signal.
More...
Market Directions
A weakening US dollar and unprecedentedly expansionary monetary
conditions underpinned recent gold and industrial metal price strength as
well as a broader array of asset price gains. Strong speculative capital
flows connected to retail investors are benefiting sector prices. Even
with production losses resulting from COVID-19 operating restrictions,
market balances are tilting into surplus. 1990s style sector 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
Sector prices weakened in the past week with the majority of stocks
across the three development classes losing ground. Phase I company
returns, which have the strongest leverage to improved market liquidity,
were relatively strong. Over the past month, Phase I and Phase II stocks
have been making up lost ground against the market leaders which remain
linked to broader market trends and fund shifts in favour of cyclical
sectors. Phase I companies are beneficiaries of expanded risk appetite among
retail investors with the added benefit of discovery potential uncorrelated
with market trends. Phase II companies are most at risk to disappointing
economic outcomes as they are the most indebted parts of the sector.
Portfolio models remain biased to the Phase I stock category Cash
positions remain elevated.
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.
More...
The 'Steak or Sizzle' blog provides summary judgements on
the top performing ASX-listed resources stocks.
More...