While global markets have not been kind to stocks in recent days, it’s mining stocks that have taken the biggest beating — and are now at levels not seen since mid-2010.
“Energy, base metals and gold stocks remain more than 20% off their cyclical peaks of a year ago,” said Ste??fane Marion, chief economist and strategist with National Bank.
Mining stocks have not been this low since mid-2010, just before the U.S. Federal Reserve announced that it would undertake another round of quantitative easing. But Mr. Marion points out that given that the global economic outlook is much rosier today than it was back then, mining stocks now have a much better valuation than they did then.
One of the main headwinds for resource stocks right now is the weakness of the U.S. dollar relative to the euro, Mr. Marion said. However, if that changes — and given the ongoing economic woes in the eurozone, it might very well — then the current outlook for commodity prices will need to be lowered.
Naturally, that would change mining stock valuations as well.
“If the euro weakens – our baseline assumption – then the current commodity price deck that underpins current valuations of resource stocks must be revised down,” Mr. Marion said.