27 May 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 global growth decelerating, 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
Falling bond yields and tumbling stock prices pointed to risk shedding
amid widespread concerns about deteriorating global growth. Daily traded
metal prices retained their downward bias although, given the global growth
uncertainties, the outcome to date could be construed as remarkably
resilient. The sector momentum is consistent with a downward cyclical
trajectory with up to a year to run. Higher iron ore prices and an
Australian currency at the lowest level against the US dollar in three years
is helping equity prices for Australian miners.
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Portfolio Performance and Positioning
Phase III stocks lost ground as a result of market fears about growth
and their use as cyclical proxies by large fund managers around the world.
Phase I and Phase II stocks were less affected being closer to their
cyclical and historically low points. Over the past month, exploration
companies have remained historically unpopular investments compared with
those on more established development or production paths. 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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