24 June 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
The Federal Reserve succumbed to pressure from financial markets as it
all but promised a rate cut in July without having the data to justify such
a move. Investors are hopeful that differences over trade policy will be
resolved but will most likely be satisfied with nothing more than
abandonment of the mutual threats to escalate tariffs. With further trade
restraints out of the way, it is hard to see why the Fed should rush into a
sequence of rate cuts, other than as a response to the demands of financial
markets to keep stoking a potential asset bubble.
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Portfolio Performance and Positioning
The performance divergence between the largest stocks in the sector and
the small mine developers and explorers making up the vast bulk of the
numbers of companies remained evident in the composition of performance
among the selected stocks. The best performing stocks reflected depressed
process and the leverage from historically low levels to even minor changes
in conditions. The portfolio has a lowered Phase III weighting in
anticipation of a negative impact from an ongoing cyclical downturn, with a
correspondingly higher cash position. 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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