With China's economy under significant pressure, are we now seeing the end of the upcycle for BHP which began in Jan 2016 when it was trading at $14 and perhaps ended at the end of June this year at around $42.
Why do I keep looking at BHP? Because its the bellweather for our resources stocks and fortunes as our economy depend highly on commodities. With banks no longer providing market leadership, the leadership provided by resource stocks is now under threat. FMG for example returned 256% since the start of the year and has only gave up slightly below 20% in this shakeup. In other words, if the tariff war takes a bigger toll on China (and we would know only much later), resource stocks would clearly be in the firing line and they have a long way to fall (as they have gained enormously and as we know, their fortunes are cyclical).
My guess is that passive investors who have clearly found comfort being rewarded by hefty dividends along the way including capital returns would unlikely want to swap their rewarding stock for anything else, much less the paltry interest one gets from the bank. Which explains the present resilience of the stock despite the looming threat in the horizon. But for those who held long enough, it serves as a reminder that BHP went from close to $50 in April 2011 to a bottom of $14 in January 2016 , that is a 5 year period of sliding prices. At $42 this July and now about 15% drop , IMO we could well be at the beginning of a protracted decline. Again, Doing Nothing is Doing Something.
