24 March 2025
Where are we in the Cycle?
All five PortfolioDirect cyclical guideposts are flashing ‘amber’ with
the Chinese growth momentum the last indicator to switch from ‘red’ after
stabilising in the latter half of 2024. Global monetary conditions are only
slowly becoming less restrictive. Sluggish productivity growth, exacerbated
by war in Europe, intensifying trade restrictions and ongoing central bank
worries about inflation, have been a continuing constraint on raw material
demand expansion. Metal market supply anxieties have dissipated. US dollar
strength remains a negative influence on prices. The guideposts are
suggesting a low point in the cycle without yet offering the necessary signs
of a conclusive cyclical turn.
More...
Market Directions
Capital flows connected to retail equity investors remain constrained by
the continuing impact of prior inflation on household savings and income.
Professional money, by continuing to discount a recession, has provided
market relief for the most growth oriented and well-established businesses.
Heavily hyped energy storage innovations are yet to affect metal demand as
meaningfully as once expected. Nor have higher metal price risk premiums,
where evident, had a correspondingly beneficial impact on related equity
valuations. New tax incentives are diverting capital for mine development
and downstream processing capacity to sponsoring nations. Persistence of a
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
Despite widespread commodity price losses in the past week, prices of
the majority of stocks advanced, with especially large gains in the Phase II
category, driven by uranium equity returns. Gradually easing pressures on
household budgets, including more favourable inflation outcomes, had been
benefitting early stage companies since late 2024 although a continuing
dearth of mineral discovery success has remained the most potent hindrance
to their performance. Performance of companies in the Phase II development
category have lagged despite demonstrable production potential and expected
proximity to profits, due to risks arising from relatively high indebtedness
and heavy reliance on execution success in sometimes unfamiliar markets and
untested management. The Phase III category, although less volatile, is the
most sensitive to capital allocation decisions among institutional fund
managers responding to changing sector valuations and relative macro growth
expectations.
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.
More...
The 'Steak or Sizzle' blog provides summary judgements on
the top performing ASX-listed resources stocks.
More...