• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Fat Tail Daily

Investment Ideas From the Edge of the Bell Curve

  • Menu
    • Commodities
      • Resources and Mining
      • Copper
      • Gold
      • Iron Ore
      • Lithium
      • Silver
      • Graphite
      • Rare Earths
    • Technology
      • AI
      • Bitcoin
      • Cryptocurrency
      • Energy
      • Financial Technology
      • Bio Technology
    • Market Analysis
      • Latest ASX News
      • Dividend Shares
      • ETFs
      • Stocks and Bonds
    • Macro
      • Australian Economy
      • Central Banks
      • World Markets
    • Small Caps
    • More
      • Investment Guides
      • Premium Research
      • Editors
      • About
      • Contact Us
  • Latest
  • Fat Tail Series
  • About Us
Macro Australian Economy

Bears Still Wrong: The Small-Cap Stocks Defying the Market Narrative

Like 0

By Lachlann Tierney, Saturday, 08 August 2020

Thing is, the bears are still wrong. Their day in the sun, or the gloom I should say, may come. But there are reasons to be positive amongst all the supposedly conflicting signals. And I think the narrative that the bears are pushing leaves you with a very narrow...

From the bear’s internal monologue:

‘Today it is bad, and day by day it will get worse―until at last the worst of all arrives.’

Arthur Schopenhauer, On the Suffering of the World

Thing is, the bears are still wrong.

Their day in the sun, or the gloom I should say, may come.

But there are reasons to be positive amongst all the supposedly conflicting signals.

And I think the narrative that the bears are pushing leaves you with a very narrow view of the stock market.

I’ll get to the names of the stocks that have caught my eye in a bit, but here’s the punchline:

Carefully selected small-caps stocks may be a good bet if/when the bears are finally right!

Now, I know you may be thinking that small-caps are riskier.

There may be something to that.

But this is more so if you are picking the wrong ones.

Check out these four innovative Aussie small-cap stocks before lockdown ends. Download your free report now.

Small-caps showing pivot to growth

Check out the performance of the S&P/ASX Small Ordinaries [XSO] (yellow line) against the performance of the ASX 200 [XJO] (orange line):



Port Phillip Publishing

Source: tradingview.com

[Click to open in a new window]

What’s the chart telling us?

Well, XSO took a bigger hit but is now neck and neck with its bigger peers in the XJO.

Meaning the pivot to growth is well and truly on.

And what’s the point of sitting on the sidelines when the Fed and the RBA are forcing your hand!

Three signals the bears are wrong

Now, I’m not saying you should be taking a punt on everything, but here are some signals that this run has legs:

  • Japanese PMI revised upwards
  • Nasdaq at new all-time highs
  • More US stimulus on the horizon

Japan’s debt-to-GDP ratio is certainly a concern, but the Bank of Japan’s (BOJ) experiments with monetary policy may be propped up by the fact that they still make stuff.

As for the Nasdaq, I’ve previously said that the Big Tech anti-trust probe in Washington will at worst result in a slap on the wrist, and the run could have another 10–15% in it.

I stick by that.

And guess what?

There’s more money about to be ploughed into the ailing US economy.

$1 trillion or $3.4 trillion, doesn’t really matter.

The Fed’s debasement of the dollar is not necessarily a sign of the end times…for now.

But nonetheless, the US dollar is getting absolutely smashed, as you can see on the chart of the US Dollar Index [DXY]:



Port Phillip Publishing

Source: tradingview.com

[Click to open in a new window]

DXY is heavily weighted towards the euro, and the euro/USD pair is going ballistic.

Does this mean that Europe is the place to be and the US is doomed?

Not necessarily, Europe will at some point need to deal with structural issues caused by negative rates.

But Europe is pushing hard at a ‘green’ recovery, which is showing up in the share prices of ASX-listed companies with exposure to the European EV market.

So, there’s a little pocket there…or a mini boom on the cards.

We’ve covered the e-commerce and BNPL mini booms extensively at Money Morning, with names like Kogan.com Ltd [ASX:KGN] and of course the likes of Afterpay Ltd [ASX:APT].

But the emerging theme for us is what’s happening with select commodities and small-cap miners.

Two small-cap miners taking off on forgotten commodities

So here are two more companies that have rocketed in the last week in this space.

For instance, there is Poseidon Nickel Ltd [ASX:POS], which bolted earlier in the week on the news that they’d hit some very high-grade nickel at their Golden Swan project.

Then there’s Pacifico Minerals Ltd [ASX:PMY], which is climbing on the back of higher lead and silver prices for their Sorby Hills project.

You can see the 60-day lead spot price and the 60-day silver price below:


Port Phillip Publishing

Source: Kitco

[Click to open in a new window]


Port Phillip Publishing

Source: Kitco

[Click to open in a new window]

So there you have it, two more metals with bullish charts, defying the market narrative that the sky is falling.

Be a smarter bull!

A final word about small-caps. Small caps can be volatile and risky.

The risk is greater if they are duds or poorly run.

A cashed-up small-cap with a breakthrough product, or one that is growing revenue, or its resource can move higher even if the wheels fall off the broader market…

This is where I’d be looking for companies that can weather the storm if the worst of all happens.

Positive news flow generally drives up share prices even when the macro picture looks dire.

The bears could be right, but it’s all about being a smarter bull.

Regards,

Lachlann Tierney Signature

Lachlann Tierney,
For Money Weekend

PS: Four Well-Positioned Small-Cap Stocks — These innovative Aussie companies are well placed to capitalise on post-lockdown megatrends. Click here to learn more.

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

Comments

Subscribe
Notify of
guest
guest
0 Comments
Inline Feedbacks
View all comments
Lachlann Tierney

Lachlann’s Premium Subscriptions

Publication logo
Fat Tail Investment Research

Latest Articles

  • Don’t Get Swept Up By the Herd: Bulls & Bears in an Age of Social Media
    By Charlie Ormond

    Markets have always reflected this chaotic behaviour, but today’s markets operate in an environment fundamentally transformed by social media.

  • The latest Closing Bell is available now
    By Callum Newman

    Tune in today to watch the latest Closing Bell podcast with Murray Dawes. We discuss gold, oil, real estate…plus a stock to watch. Tune in now!

  • Thorium: One Step Closer to China’s Energy Fortress
    By James Cooper

    Forget AI, the biggest breakthrough of this century will revolve around ENERGY. And the commercialisation of Thorium reactors could be at the heart. Read on to find out why China could be about to make history.

Primary Sidebar

Latest Articles

  • Don’t Get Swept Up By the Herd: Bulls & Bears in an Age of Social Media
  • The latest Closing Bell is available now
  • Thorium: One Step Closer to China’s Energy Fortress
  • The famous yield curve: buy or sell signal? You decide…
  • How Australians voted for a great wealth redistribution

Footer

Fat Tail Daily Logo
YouTube
Facebook
x (formally twitter)
LinkedIn

About

Investment ideas from the edge of the bell curve.

Go beyond conventional investing strategies with unique ideas and actionable opportunities. Our expert editors deliver conviction-led insights to guide your financial journey.

Quick Links

Subscribe

About

FAQ

Terms and Conditions

Financial Services Guide

Privacy Policy

Get in Touch

Contact Us

Email: support@fattail.com.au

Phone: 1300 667 481

All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in our reports are forecasts and may not be a reliable indicator of future results. Any actual or potential gains in these reports may not include taxes, brokerage commissions, or associated fees.

Fat Tail Logo

Fat Tail Daily is brought to you by the team at Fat Tail Investment Research

Copyright © 2025 Fat Tail Daily | ACN: 117 765 009 / ABN: 33 117 765 009 / ASFL: 323 988