24 September 2018
Where are we in the Cycle?
Peak metal prices were recorded in February 2018 in an already mature
metal price cycle. Unusually prolonged supply side constraints which have
been offsetting the effect of weak demand growth are losing their impact as
newly initiated production starts to flow in some metal categories. Monetary
policy settings are tightening as weak productivity constrains global growth
potential leading to a deceleration with an adverse effect on metal use.
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Market Directions
Sector equity and commodity price indicators are toward the lower end of
their levels from the past year with the exception of the prices of the
market leaders which continue to benefit from institutional asset allocation
decisions and their correlation with broader equity market conditions. The
smallest stocks in the sector have been especially leveraged to weakening
background conditions. Among mid tier stocks, declines have outstripped
advances over the past six months.
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Portfolio Performance and Positioning
General gains among larger stocks were reflected in Phase II and Phase
III stock price moves. Phase I stocks lagged later stage companies with
advances and declines within this group evenly split. Performance through
the month of the macro model has been in line with the benchmark indicator.
The macro portfolio remains tilted toward advanced exploration efforts. No
portfolio adjustments were made.
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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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