Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Hi MM, We are hearing a lot about a resources super cycle. Why then do we see (in the Tuesday morning MM report for example) "fund managers increased healthcare and reduced energy & miners – similar to the ASX." Why is there this disconnect and have these fund managers not subscribed to the 'super cycle' story? Alain
Hi Alain,
Markets are made up of many participants with many different views, so there will certainly be fund managers that don’t subscribe to this thinking. There will also be times where the level of conviction in a particular view ebbs and flows based on prevailing data, flows into/out of funds/strategies, passive flows and individual stock weightings in indices.
There are simply so reasons why stocks go up and down on a given day or week. The super cycle narrative does not mean stocks exposed to it will just go up. Rather, it means there is a structural demand/supply imbalance that will last for many years, longer than a shorter term cycle.
Importantly, we don’t believe all commodities fit this bill.
It’s also important to distinguish between time frames. In the short term, long copper has become a fairly “crowded trade” hence after recent gains in the likes of BHP and Sandfire on the ASX, it’s no great surprise some investors are trimming their exposure and “bargain hunting” in the out of favour areas of the market like healthcare.
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