The Reason Wall Street Is Turning Bearish on Big Mining Company Stocks

Gold Bulls, Your Belief is Being Tested!
Published on: Oct 10, 2024
Author: Caroline Kong

As the time of U.S. presidential election approaches, institutional and investor sentiment in the mining sector is beginning to change in subtle ways.

After JPMorgan Chase & Co. announced that it had downgraded Anglo American Plc stock ratings from overweight to neutral, the company’s stocks fell 2.1 per cent instantly.

The wall street investment bank also downgraded Sweden’s Boliden AB from from neutral to underweight, causing Boliden shares to fall more than 3% on Wednesday (9 October).

Analysts at JPMorgan said the value of the mining stock could evaporate by 20 per cent if the US decides to impose tariffs after the November presidential election.

According to the latest report by analyst Dominic O’Kane and his team, the metals market has not yet priced in the rising risk of trade-related outcomes, such as higher tariffs, but clients have expressed concern.

JPMorgan’s analysis shows that the fair value of large mining company stocks could fall between 10 and 20 per cent in the event that base metals and iron ore prices fall by more than 10 per cent.

The investment bank believes that tariffs have been a key factor in the decline of mining stocks by more than 10 per cent in 2017-2018 during the Trump administration.

Now, with four weeks to go before polling day in the USA presidential election, the latest national poll released by The New York Times on 8 October shows Harris leading Trump with 49% of voting intentions to Trump’s 46%.

Gregory Wischer, a researcher at the Payne Institute for Public Policy at the Colorado School of Mines, said this week that tariffs will remain at the centre of U.S. mineral policy, regardless of the outcome of the election. The Harris administration is likely to maintain the Biden administration’s tariffs on Chinese mineral imports, while the Trump administration is likely to raise tariffs dramatically, including a possible 60 per cent tariff on Chinese imports and a 10 per cent tariff on all imports.

As large mining companies facing headwinds from the U.S. election, investors may consider turning their attention to junior companies that are exploring or developing mineral projects in safe jurisdictions, with strong management teams, strict financial discipline, and a history of operational success.

Base Metals Copper Mining Value Stocks