Issue link: http://resourceworld.uberflip.com/i/963504
A P R I L / M A Y 2 0 1 8 www.resourceworld.com 25 At the Market by Rodney Blake The Resource Sector – stuck in first gear T here is no other market quite like the resource sector. Where other markets tend to go from month to month or quarter to quarter, the resource sector seems to be renewed at the start of each year. Perhaps it's the historical pros- pector's mentality but every year it seems we expect the resource markets to have a good year. We wipe the slate clean at the end of one year and we start the next with renewed optimism that the year ahead will be better. For the most part, resource markets tend to support this mentality – at least for the first half of the year. Typically, but not always, resource markets gain momentum in early January as fresh money comes into the sector fol- lowing the previous year's tax loss season. This introduction of funds coincides with the seasonality of resource prices that gen- erally rise in the first quarter. These new funds raise stock prices until late spring or early summer as investors await the first exploration field results. From there the market usually cruises through the quiet summer months only to rally again in the fall as field reports fill investors' inboxes. Then tax loss season begins and the yearly cycle is completed. Think of it a car increasing and decreasing in speed and shifting in and out of gears as it goes. But this year has been different. So far, the 2018 resource market has been quite unique – in that, from my perspective – most resource issues have been stuck in first gear. As recorded by the TSX Venture Exchange, the inflow of funds surged into the market in early January and drove the world's best barometer of resource stocks up over 15% to the 925 level in the first 10-days of the month. From there, there was an immediate correction that saw the Venture drop back down to about 830 by early February. It has been trading in a narrow band near that level until, as I write this article, mid-March. Think of it as a car quickly accelerating away in first gear and the driver, in his haste to get to a higher level, blows the shift while chang- ing gears and the car gets stuck in first gear. The exchange or car is still moving, but it's just not gaining any momentum. In most years, rising resource prices helps to pull the market higher for the first few months. This year, most resource prices, just like resource stocks, surged higher early and then pulled back and also leveled off at lower prices. They too seem to be stuck in first gear. We've got two intertwined markets – resources and resource stocks – that are range bound. Resource prices need to rise and then resource stocks should follow in tandem. The Venture Exchange will finally break and stay above 835 as the bull market returns. Until then, we seem to be stuck in first gear. n Rodney Blake is an Investment Advisors with Canaccord Genuity Wealth Management, a division of Canaccord Genuity Corp, Member- Canadian Investor Protection Fund. The information contained in this article is drawn from sources believed to be reliable, but the accuracy and completeness of the informa- tion is not guaranteed, nor in providing it does Rodney Blake, Canaccord Genuity Corp, or its subsidiaries, or affiliated companies, assume any liability. This information is current as of the date appearing in this article, we do not assume any obligation to update the informa- tion or advise on further developments relating to these securities. This article should not be considered personal investment advice or a continued on page 69