23 September 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
Federal Reserve policy and US-China trade talks again interacted to
dominate equity price outcomes. Equity markets weakened when Chinese
officials cancelled a trip to farming areas in the USA in a move construed
as a setback in trade talks. The Federal Reserve did, as expected, ease
monetary policy by cutting the target Fed Funds rate by 0.25 percentage
points. After the decision, attention focused on unusually disparate views
among Fed officials about the future direction of policy. Resource sector
equity prices reflected initial optimism about trade and monetary policy
settings but finished the week edging lower. Exploration stocks produced a
fifth consecutive weekly gain.
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Portfolio Performance and Positioning
Phase I companies continued to produce the relatively strong gains
evident over the past three months but larger companies in the sector
contributed negatively. Phase II stocks are lacking exposure to improved
metal market conditions without the offsetting benefit of the potential
exploration interest among Phase I companies. No additional changes were
made to portfolio models which remain tilted toward an exposure to Phase I
companies trading at historically depressed prices while larger companies
continue to face higher cyclical risks.
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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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