Far East Capital Newsletter
What will move markets in 2019?
27 Jan 2019

In This Issue

What will move markets in 2019?

There has definitely been an improvement in sentiment in the Australian resources market. On the fundamental front this has been aided by the firmness in the gold price and the recovery of the oil price. On the psychological front we have seen the exhaustion of the relentless selling that dogged 2018. That alone is enough to turn the market around as investors who are overweight in cash seek to deploy it in a manner that will make them money. It doesn't deliver a bull market, but it does signal that investors are looking for opportunities again rather than running for cover.

There is the opportunity for many mining situations to improve in price by 20-40% in the short term (1-3 months) before hitting more gentle, longer term downtrends. These may cause problems later, but we need to assess their relevance when they come into play.

The IMF is warning of the risks of a sharp economic downturn, saying amongst other things that Chinese growth is the slowest it has been for 30 years. Even President Xi is promoting caution, saying publicly that China must be careful about Black Swans and Grey Rhinos. In this context the events that will move markets most dramatically in 2019 will be the continuing trade war and geopolitical developments that are often unpredictable. Thus the gold price will receive frequent stimuli, as will our gold sector. 

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