Could a trend reversal be on the cards for resources?
Sectors go from bull markets to bear markets and back to bull markets again.
When a trend reverses, the majority of investors hold onto losing shares or they miss out on the new upward trend.
Looking back, this happened in the late 1990s before the dotcom bubble burst. Stocks soared, only to start their descent in 2000. They kept falling for over two-years shedding over 78% along the way.
It was a similar story after the financial crisis in 2008. At the beginning of 2009, everyone hated stocks. But this was actually the time to buy. Over the next four years, stocks soared.
You can see a similar picture with resources
. In early 2011, resources were the place to be. Gold hit an all-time high of $1,900 an ounce. And gold and other resource stocks soared.
Then the tide turned. Prices of resources plummeted and the US dollar rallied. Along with a drop in the price of resources, mining stocks fell hard.
Just have a look at what’s happened to the price of some of these resources over the past three years…
Gold down 37%;
Silver down 68%;
Platinum down 38%;
Copper down 37%;
Lead down 33%;
Zinc down 16%; and
Iron ore down 63%.
The share prices of mining companies have suffered worse than the prices of the resources themselves.
If the trend in resources suddenly changes, many would miss out on the recovery
That’s why you need to keep an eye on this sector, Dan Ferris in Daily Wealth
explains. A recovery could happen at any time. And when it starts, the gains will be plentiful investing in resource stocks.
The drop in the prices of resources won’t go on forever. And when investors get complacent and think a sector is doomed, it tends to surprise.
Of course, no-one can be certain when this recovery is going to happen. But keep a watchful eye on the sector for signs of a recovery. It could be the start of a new bull market in resources.
So there you have it. Why 2015 could be the year that resources snap out of their bear trend and start to climb.
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