26 April 2021
Where are we in the Cycle?
Of the five PortfolioDirect cyclical guideposts, one is ‘green’ and four
are flashing ‘amber’. Cyclical conditions have been disproportionately
affected by the unprecedented surge in liquidity from central banks and the
accompanying fiscal expansion. Looking ahead, commodity markets are at risk
from an inevitably slowing monetary momentum. An apparent acceleration in
global growth, reflected in forecasts for 2021, will conceal a tendency for
weakening through the course of the year and into 2022. The cyclical
positioning has been characterised as being near a peak and at risk of
moving into a ‘downswing’ phase. More...
Market Directions
A weakening US dollar and unprecedentedly expansionary monetary
conditions have underpinned price strength among a broad array of assets,
including those of industrial and precious metals. Speculative capital flows
connected to retail investors are supporting sector prices and offsetting
the negative effect on mining equities of physical market balances tilting
into surplus due to a slowdown in demand. Heavily hyped energy storage
innovations are stoking interest but remain too far in the future to affect
current metal demand. 1990s style investment performance - when modest
sector equity price gains occurred in the midst of sometimes highly
disruptive macro conditions - remains the underlying theme. More...
Portfolio Performance and Positioning
Phase I companies lost ground more dramatically against the other two
development categories as the earliest stage stocks gave up all gains from
earlier in the month. The majority of stocks in the other two development
categories also lost ground. Unusually strong money flows and a general
willingness among retail investors to take speculative risks continue to
favour the earliest stage companies. Phase I stocks also offer uncorrelated
returns from discovery opportunities. Phase II companies, among the
riskiest investment options due to their indebtedness, heavy reliance on
execution success and need for strong global economic conditions to sustain
sales, are struggling to match risk adjusted returns elsewhere. Portfolio
models remain biased to the Phase I stock category with cash positions
reflecting the cyclical risks associated with slowing rates of monetary
expansion and output growth.
More...
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.
More...