23 December 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
US equity benchmarks hit new records as confidence about the growth
outlook gained ground. Market volatility measures subsided after a brief
flurry in prior weeks adding to signs that investors had become less worried
about the outlook. Government bond yields edged higher even as high yield
corporate yields fell in further signs of ebbing pessimism about the growth
outlook. The main sector equity benchmarks are now at the highest levels for
several months. Prices of mining commodities were generally higher although
few look like finishing the year higher than they had been at the end of
2018.
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Portfolio Performance and Positioning
Phase III stocks once again ran ahead of the rest of the sector as they
took their lead from broader equity market conditions reflective of greater
optimisms about global growth conditions. Earlier stage companies are yet to
benefit from any market re-pricing. 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 any cyclical weakness than they have
done in past cycles since they are starting from already historically
depressed price levels and greater leverage to a sustained improvement in
sentiment toward the sector which would accompany stronger global growth.
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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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