30 September 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
Equity prices turned lower as the ebbs and flows of the US-China trade
dispute continued to disrupt daily market movements. Mounting evidence of
slowing global growth brought fears of subdued US manufacturing conditions
finally filtering into employment growth, the one bright spot in the global
economic picture. Resource sector equity prices reflected the broader market
with modest losses once again defying expressions of pessimism about the
global growth outlook. Evidence persists that the most recent rise in the
gold price has been a product of changes in financial market relative prices
rather than a longer duration structural shift in gold market conditions.
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Portfolio Performance and Positioning
Phase I companies continued to produce the relatively strong gains
evident over the past three months with an added impetus, in the past week,
from a single stock reporting a copper-gold discovery. Larger companies in
the sector contributed negatively. Phase II stocks are lacking exposure to
improved metal market conditions without the offsetting benefit of the
potential exploration interest among Phase I companies. No additional
changes were made to portfolio models which remain tilted toward an exposure
to Phase I companies trading at historically depressed prices.
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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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