The massive rally in resource stocks is nothing short of spectacular. Cliffs Natural (CLF) is up five-fold in 2016. Freeport-McMoRan (FCX) is up 132% YTD. Canadian miners are lifting the TSX index, too.
Teck Resources (TCK) dipped nearly 7 percent on Friday, December 9. It is up an incredible 560% this year. Coal, copper, and zinc pricing is strengthening, driven by the expectations the Republican government will make significant infrastructure spending decisions.
In the energy sector, Cenovus Energy (CVE) is range bound, despite oil prices trading at above $50/bbl. It remains to be seen if energy prices do hold, but one thing is certain: sentiment for the beaten up sector shifted. Bullishness is so strong that even deep-water drillers are up. Fundamentally, it costs at least $60 -65 / bbl to get oil out, so even as UDW drillers turn on drilling activity, profits are far from certain.
Gold miners are missing out on the rally. Gold is viewed as a hedge against currency, but the U.S. dollar remains the world reserve currency. Until that changes, or other currencies strengthen, gold will underperform. The weak Euro, destabilized on worries the EU will dissolve, is only strengthening the USD and hurting gold.
The takeaway is simple: metals and oil/gas are the favorites in the resourcing sector.
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