28 May 2018
Where are we in the Cycle?
Global economic growth might have already peaked during a surge in the
latter part of 2017. Beneficial effects will linger but uncertainties over
trade restrictions are now putting corporate investment decisions at risk at
a critical juncture in the cycle as supply constraints, monetary conditions
and exchange rates become less supportive.
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Market Directions
Trade policy, European political instability, Korean crisis management
and interest rate policy were influential during the week. Resource sector
equity prices were generally lower with the largest falls among the smallest
stocks in the sector as the consensus about synchronized global growth
outcomes seemed to wane. A higher US dollar affected commodity prices less
than average but large foreign exchange swings are affecting the financial
strategies of miners working in different locations.
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Portfolio Performance and Positioning
The macro portfolio remains tilted toward the smaller end of the market
where there is less correlation with broader equity market conditions,
mitigating the effects of the large fall in the prices of Phase III
companies during the week. Phase I companies led the returns in the week
and for the month to date. Phase II companies have been the weakest over
the month. Changes made to model holdings, consistent with the
PortfolioDirect stock rating framework, have reflected relative price
movements. A significant cash position remains.
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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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