22 July 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
Global equity prices generally finished on a down note albeit, in the
case of US markets, near record levels. Comments from the head of the
Federal Reserve have reinforced expectations of a policy shift at the end of
July. Rising confidence about a Federal Reserve rate cut helped spur
cyclical investments, including mining stocks. Those companies without
iron ore exposure - or gold - lagged the investment returns from market
leaders. The expectation of a spur to growth from lowered interest rates
lifted daily traded nonferrous metal prices.
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Portfolio Performance and Positioning
For the third consecutive week, against the trend of prior months, Phase
I stock returns were relatively strong although gains from this segment of
the market are coming from historically low levels leaving absolute prices,
as a group, still near all time low levels. Phase II companies were again
the weakest of the three portfolio segments as development risks magnify
disadvantageous cyclical positioning. The portfolio has an elevated cash
position in recognition of the ongoing cyclical downturn 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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