Signs of Cyclical Improvements

Non ferrous metal prices showed their strongest gains in over 10 months during the last days of April. The chart shows the price trajectory of the principal daily traded nonferrous metal prices - aluminium, copper, lead, nickel, tin and zinc - during the current cycle (in red) which has been underway for 48 months since the beginning of 2011. The blue line shows the average of each of the nine identified cycles since 1960. The market’s cyclical positioning is one guidepost used to frame fund allocation recommendations within the PortfolioDirect strategy framework. The recent improvement in prices will be welcome relief for companies and may spur some renewed investor interest in the sector. Against that are two cautionary points. The chart emphasises the extent to which prices remain below their cyclical peak values and, just as importantly, illustrates the wide gap between current prices and where they might have been this far into earlier price cycles. The extent of these gaps is likely to remain a weight on sentiment toward the sector.