Commodity sector more interesting than it has been for years

Commodity sector more interesting than it has been for years. As the chart indicates Australian commodity prices are closing in on GFC levels. In our view the sector is more interesting than it has been for several years; mining companies have been at the forefront of taking cost out of their business as their income fell, and we expect the majority of commodities to stabilise at or near current levels. The earnings outlook for the market overall has had the headwind of large negative revisions to the profit estimates of mining and energy stocks, which should now abate. The first rate hike in the US is expected to be around mid-year which may cause volatility in equity markets. This timing would also coincide with the seasonally weak period for equities. As such we will be watchful during this period for a more defensive positioning of the portfolio. (VIEW LINK)