29 July 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
US equity markets continued to set records as expectations of an
imminent cut in official interest rates solidified despite little evidence
in the flow of data that the US economy needed additional stimulus. Yields
on US and European bonds retained their downward bias amid expectations of
further slowing in global growth, contributing to the upward push in the
gold bullion price. Global mining sector equity indicators were edging lower
by the end of the week albeit from heightened levels enhanced recently by
the combination of generally strong US equity prices and the highest iron
ore prices in several years.
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Portfolio Performance and Positioning
Phase I stocks are heading for their first monthly gain since February
although gains from this segment of the market are coming from historically
low levels leaving absolute prices, as a group, still near all time low
levels. Phase II companies were again the weakest of the three portfolio
segments as development risks magnify disadvantageous cyclical positioning.
An actual global growth slowdown, possibly led by further disruption in
manufactured goods trade flows, would damage the outlook for the market
leaders. The portfolio has an elevated cash position in recognition of the
ongoing risk of cyclical downturn in metal markets. 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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