The rapidly evolving global trade environment, particularly between the US and China, has driven significant uncertainty in the global macro outlook.
While the environment is still very fluid, being subject to Trump’s day-to-day tariff policy oscillations, the outlook for economic growth has undeniably deteriorated since ‘Liberation Day’ on April 2, with a global slowdown being increasingly likely in 2025, and a global recession also possible.
Broadly speaking, a weaker global economic outlook is incrementally negative for commodity demand (and prices) in 2025, which has driven relatively broad-based weakness across the mining and energy sectors in recent weeks, with gold being a noteworthy exception.
Adding further uncertainty to the picture, China appears likely to unveil fiscal and monetary stimulus measures to counter the impact of the 145% of tariffs levied against its economy by the US. China’s low inflation gives it the flexibility to release a stimulus package of significant scale, which is likely to be focused on providing support to housing and consumer spending. This presents upside risks to base metals (copper, aluminum) and bulk commodity (iron ore) prices over the very near-term, ceteris paribus.
Overall, the rapidly evolving macro and policy environment appears likely to drive continued volatility in commodity prices over the near-term. Notwithstanding the prevailing uncertainties, we continue to see value in select commodities that have compelling long-term fundamentals, which is the focus of this report.
Adjusting the Focus Portfolio’s Resources Sector Positioning
In light of changes to the macro outlook, we have adjusted our resources sector positioning by reducing the portfolio’s energy sector exposure to neutral by trimming Santos. We have also increased the portfolio’s gold sector exposure by upweighting Evolution Mining.
However, we note these changes are partly driven by procedural portfolio rebalancing (i.e. adjusting our model weightings to maintain targeted active exposures by accounting for changes to index sector weights).
Overall, the Focus Portfolio is slightly overweight resources, with a 23.5% sector weighting compared to the ASX 300 at 21%. When excluding gold, our weighting is 18.5% compared to the index at 17%.
Our resources positioning remains focused on commodities with tight supply dynamics and supportive secular demand drivers, with key overweights being to copper and gold. We now have a neutral exposure to energy, and we retain an underweight exposure to iron ore and battery metals.
The remainder of this report discusses our current views towards oil & gas, gold, copper and iron ore, which provides the rationales for today’s portfolio changes and our positioning across the spectrum of commodities.
| Name | Ticker | Portfolio weight | Rationale | ||
| Before | After | Change | |||
| Santos | STO | 5.0% | 3.5% | -1.5% | Shift to neutral stance on energy, portfolio rebalancing. |
| Evolution Mining | EVN | 4.0% | 5.0% | 1.0% | Maintain overweight exposure to gold sector, portfolio rebalancing. |
| ResMed | RMD | 3.5% | 4.0% | 0.5% | RMD has pulled back >15% from its 2025 highs despite a strong Q2 result which drove forward EPS upgrades. RMD is a high quality 'defensive growth' business with only limited exposure to tariff risks. The company trades at a forward PE of ~20x which represents highly attractive value considering a 3-year EPS CAGR of ~10% supported by secular tailwinds for CPAP. |
Source: Refinitiv, Wilsons Advisory.
Reducing Oil & Gas Exposure to Neutral – Less Global Demand, More OPEC+ Supply
Sector exposure: Santos
Global oil market fundamentals have worsened over the last few weeks, due to increased risks to demand after recent developments in US trade policy, alongside continued growth in global oil production.
Last week, the U.S. EIA significantly lowered its short-term Brent crude oil forecasts compared to the prior month. On the demand side of the equation, the EIA stated that macro ‘uncertainty could lead to lower economic growth, which could lead to less growth in demand for petroleum products'.
The supply backdrop has also become incrementally negative for oil prices, with OPEC+ announcing on April 3 (following Trump’s tariff announcements) that some countries will start oil production increases in May, ahead of their original timeline of July. As a result, the global oil market is now expected to be in oversupply throughout 2025/26.
US foreign policy against key oil-producing adversaries (Russia, Iran, Venezuela) remains a key uncertainty for the oil market. With US pressure on Iran already intensifying, if Trump tightens sanctions on Iranian oil exports, this could meaningfully impact the global supply/demand balance and provide a degree of support to the oil price in the near-term. Stimulus in China could also provide some support, with it being the world’s largest importer of oil.
Everything considered, we have become increasingly cautious towards the oil price (and hence the oil & gas sector) due to the prospect of weaker demand and accelerated supply additions from OPEC+.
Despite the weakness already seen in the oil price, we see the risks to the oil price as balanced over the near-term, albeit with the likelihood of significant volatility due to the uncertain/fluid macro backdrop.
Accordingly, the Focus Portfolio’s active exposure to the energy sector has been decreased to neutral relative to the ASX 300, by reducing Santos to a weight of 3.5% (vs 5% previously).
Notwithstanding a more cautious outlook for oil, Santos remains attractive from a bottom-up perspective. At current levels, Santos offers compelling value, trading at an implied oil price of ~US$50/bbl (vs spot of US$65/bbl), while the business has a solid free cash flow profile over the medium-term even under conservative oil price assumptions.
Overweight Gold – Still Shining Bright
Sector exposure: Evolution Mining
As a ‘safe haven’ asset, gold is providing a hedge against rising geopolitical and global trade risks.
Notwithstanding this year’s gold price rally to record highs of ~US$3,200, we remain favourable towards the commodity over the medium-term given 1) structural demand growth from central banks (as they diversify their balance sheets away from the USD), 2) elevated macro tail risks (US fiscal sustainability concerns, tariff uncertainty, weaker growth),and 3) ongoing geopolitical uncertainty (with ongoing wars in both Ukraine and the Middle East).
With sell-side gold price forecasts now meaningfully below the spot gold price, there is significant consensus earnings upside across the ASX gold mining sector if the gold price maintains current levels or pushes higher (in line with our base case).
Consequently, we are maintaining an overweight exposure to the gold sector by upweighting Evolution Mining, which is our preferred exposure given its strong operational delivery (reaffirmed with its in-line March 2025 operational update yesterday) and its attractive free cash flow profile over CY25/26 (as production lifts and capex eases).
Underweight Iron Ore – Structural Oversupply Set to Increase
Sector exposure: BHP (diversified)
Our cautious stance towards iron ore remains unchanged despite the prospect of stimulus in China, due to looming supply additions and the ongoing structural challenges that will weigh on demand, which together are likely to underpin a growing market surplus. With iron ore already in oversupply, there are two key concerns that keep us cautious towards iron ore over the medium-term.
- Subdued Chinese steel demand –
beyond the clear cyclical risks to iron ore demand from a deteriorating macro outlook, longer term demand is also challenged. China’s housing market is significantly oversupplied due to structural issues (overbuild, demographics) that in our view cannot be solved by stimulus alone. New housing demand in China is expected to halve over the next decade, which will weigh on China’s all-important construction sector, resulting in lower Chinese iron ore demand – and effectively flat demand globally – over the medium-term. - Production growth from existing and new projects –
in addition to growing supply from the major iron ore producers’ existing assets, the Simandou project in Guinea is set to expand global supply meaningfully over the next few years. Simandou is estimated to contain 1.5 billion tonnes of high-grade iron ore (making it one of the largest untapped reserves in the world), with the project on track for first production by late 2025. It is expected to have an annual production capacity of 120 million metric tonnes, which will supply ~10% of global demand by 2028. The ramp up of low-cost supply from Simandou over the medium-term is likely to further exacerbate the existing iron ore oversupply and could lower the global cost curve, thus presenting downside risks to the iron ore price from current levels of US$98/t.
Overall, the structural outlook for iron ore remains unattractive. While China’s stimulus efforts could trigger a sentiment-driven rally in the iron ore price over the near-term, stimulus is unlikely to alter expectations of a growing supply/demand gap (and subdued prices) over the medium and long-term. This keeps us comfortable remaining underweight the commodity.
BHP is the Focus Portfolio’s preferred iron ore exposure due to its low position on the global cost curve, its disciplined approach to capital allocation, and its diversified asset portfolio which offers significant copper exposure (representing ~40% of group EBITDA).
Overweight Copper – Tight Supply Backdrop an Offset to Cyclical Uncertainties
Key sector exposures: Sandfire Resources, MAC Copper, BHP (diversified)
Since Trump’s ‘Liberation Day’ tariffs, the LME copper price has given back some of its year-to-date gains due to concerns around the global growth outlook.
As an industrial metal (albeit with growing decarbonisation demand), near-term copper consumption will be sensitive to changes in manufacturing activity, particularly in China. However, despite the cyclical risks to demand from a potential global slowdown over the near-term, there are three key factors that keep us positive towards the commodity.
- Supply constraints –
unlike iron ore and oil, the copper market has entered this period with a tight supply/demand balance. This has been exacerbated by expected US copper tariffs that have driven further tightness in the ex-US market, due to the re-routing of physical flows into the US. There is also limited new supply in the pipeline. Overall, we expect physical supply tightness in the global copper market to provide a cushion against tariff-related cyclical demand weakness. - Secular demand drivers –
while the majority (~70%) of current copper demand is driven by traditional cyclical uses (e.g. construction, machinery), the majority of demand growth is being driven by the secular drivers of Decarbonisation and Gen AI (i.e. data centres). Therefore, even if cyclical demand weakens, demand growth can remain positive over 2025 due to the offset provided by these secular tailwinds. - China stimulus beneficiary –
with China being the world’s largest consumer of copper, we expect the commodity to be a meaningful beneficiary of China’s expected stimulus package. This should help to offset tariff-driven cyclical demand headwinds by supporting consumer demand, construction activity, and investments into infrastructure and electrification.
Overall, while a cyclical demand slowdown could potentially soften the supply/demand balance this year (potentially shifting the market from a deficit to a balanced market or a slight surplus), there is still a broad consensus that the global copper market will be in a supply deficit from 2026.
In any case, what’s most important is that the attractive long-term fundamental outlook of the global copper market is unchanged. We continue to expect copper to be in a growing supply deficit over the medium/long-term, which underpins our expectations of higher copper prices over time.
Accordingly, the Focus Portfolio remains overweight copper, with our key exposures being through pureplay copper miners, Sandfire Resources and MAC Copper. The portfolio also has diversified exposure to the commodity through our holdings in BHP, Evolution Mining, and South32.
Written by
Greg Burke, Equity Strategist
Greg is an Equity Strategist in the Investment Strategy team at Wilsons Advisory. He is the lead portfolio manager of the Wilsons Advisory Australian Equity Focus Portfolio and is responsible for the ongoing management of the Global Equity Opportunities List.
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