Small caps are back baby | Australian Markets

It’s been a whereas since Dollar Bill put pen to paper.

At first, it was deliberate. Then it turned inertia. I additionally forgot the password to my trading account and took it as divine intervention. But markets have a approach of dragging you back in – and currently, they’ve been something however delicate. Something’s stirring in small-cap land – and it’s not simply the same old background hum.

Just two weeks in the past, the United States Department of Defence quietly turned the most important shareholder in MP Materials, which owns the Mountain Pass mine in California, the one uncommon earths operation of scale on US soil. A generally canny and largely sober colleague of mine, Bill McConnell, wrote about it instantly in Bulls N Bears. He was onto it the very day it broke. Others chimed in later, maybe a tad gradual to the celebration, however that’s not their fault. Most people get there ultimately.

Then Apple Inc jumped in, slapping one other half a billion {dollars} on the desk for equity, taking the entire cheque for MP to a cool US$1 billion – all in below a week. MP’s share price doubled, including US$5 billion to its market cap just about in a single day.

That alone sparked the headlines, however for Dollar Bill, the actual leg twitch got here shortly after by means of a mixture of occasions. The ASX 200 and the All Ords smashed document highs final week, the latter crusing by means of 9000 factors for the primary time. These weren’t well mannered strikes. These have been rafter-shaking, hold-my-beer type of surges.

Also, copper costs punched out a new document peak this month on the similar time that silver nudged just below US$40 for the primary time in more than a decade. Gold stays stubbornly above the $5000 mark.

Dollar Bill’s even overheard a few stuffed fits on the membership whispering about a revival in lithium – and for as soon as, they could be onto one thing. Lithium doyen’s Mineral Resources and Pilbara Minerals have each surged about 50 per cent prior to now month. And when the large boys begin shifting, the minnows are likely to comply with. Just take a take a look at lithium junior Galan, which has hiked from about 9c to 14c currently.

Then there are the IPOs, these long-forgotten unicorns, which look like sniffing the morning air again. Apart from the odd ETF, 2025 has been a desert for new ASX listings – the driest yr in more than a decade. But currently? There’s been the sound of hooves… they usually’re shifting.

Since June, eight new floats have landed on the boards, most have been modest, sub-$100 million raises, however that’s precisely the type of froth that alerts early motion. The most up-to-date, Tali Resources, listed on a Friday and tripled by Tuesday.

Then there’s the capital raising frenzy. In simply the previous two months, Dollar Bill has noticed one other eight raises, and each single one of them was both considerably or considerably oversubscribed. That kind of heat hasn’t been seen in a whereas and it’s beginning to really feel much less like a fluke and more like a market waking up hungry.

The standout? West Coast Silver, which set out to raise $3 million and ended up fielding $11 million in bids. Management reluctantly capped it at six. The raise priced at 11c – however when the stock resumed trading, it launched out of the gate at 17c. That kind of leap was the stuff of IPO fairy tales. Now it’s turning up midweek.

As for Dollar Bill? I had my hand within the jar, already having a few of these puppies tucked away within the back pocket however I slept by means of the ultimate bid window. Not the primary time I’ve missed the celebration whereas dreaming of champagne.

Just this morning, Larvotto Resources lit up the boards with a $60 million raise – finished nearly flat to its final traded price. If that’s not a bellwether for risk urge for food returning to small caps, I don’t know what’s. There’s a scent on the wind, and I’d swear it smells like capital.

Back to the IPOs, June noticed more new listings than the earlier 5 months mixed and July is already on observe to beat that again. If this retains up, we might quickly be watching an honest-to-goodness revival for small caps, not simply in listings, however in urge for food.

Altogether, it’s beginning to really feel like a real inflection level, or the world’s costliest coincidence. Mark Twain stated historical past doesn’t repeat, but it surely typically rhymes. Right now? It’s buzzing a very acquainted tune.

That’s not a useless cat. That’s a stay wire.

And, whereas the large finish of city could also be printing information, the actual money, the actual motion, seems to be shifting back to the forgotten nook of the exchange – small caps.

Firstly, uncommon earths. This isn’t a fashion play. This is geopolitics at its best… in mining boots. It’s about who controls the heart of the new economic system – electric autos, chips, weapons and vitality.

So when each Apple and the Pentagon are betting billions on the identical strategic metals that Aussie juniors have been betting on for some time, whereas commodities break information and the ASX roars – that’s not background noise. That’s the primary occasion.

For Dollar Bill, this isn’t simply intestine really feel. Shaw & Partners dubbed 2025 “the year to feast on ASX small caps,” citing decrease charges, valuation resets and looming earnings upgrades as rocket fuel.

But let’s dig a little deeper and speak numbers – those that matter. Not the polished ASX 200 charts they wheel out at charity lunches. I imply the back-row battlers. The drill marketing campaign dreamers. The micro caps.

People bandy about ‘small cap’ prefer it means one thing, however technically it covers ASX stocks ranked from 300 up to 101 – a $1 billion to $6 billion bracket. Not precisely minnows and never small cap however hey, that’s the technical rationalization.

The actual motion lives within the ASX “Emerging Companies Index” which incorporates these ranked with market caps ranked from quantity 350 to quantity 600, typically between $350 million and $1 billion. That’s the actual sharp finish.

And for years now, that’s additionally the top that’s been bleeding. From April 2022 to April 2023, the Emerging Companies Index fell 28 per cent. It was flat by means of April 2024, then down one other 10 per cent into April 2025.

Those three years of ache have pushed Dollar Bill to the bottle.

Meanwhile, the ASX 200? Down simply 2 per cent throughout the identical timeframe. Stats don’t lie and these stats spotlight the underperformance of small caps in opposition to the large board.

But the worm may now lastly be turning. Since April, proper when Trump detonated his ‘Liberation Day’ hand grenade with sweeping tariffs, the Emerging Companies Index is up 22.6 per cent. That’s higher than the ASX 200’s own stellar 19.2 per cent rise.

That’s not simply restoration – that’s outperformance.

Dollar Bill says when the market’s most bruised nook begins to beat the large boys, it pays to concentrate.

In late 2024, Simon Conn at Investors Mutual was already calling it. A “valuation disconnect,” he stated, tipping price cuts to set off a shift back into high quality small caps. The Reserve Bank chimed in reducing the money price in February and adopted up again in May which coincided just about bang on with the outperformance in small caps – good one Simon.

Add to that the roaring commodities market, copper surging, silver going vertical on photo voltaic and tech demand – and that soundtrack is getting louder.

Lithium doyen’s Pilbara Minerals and Mineral Resources have each hiked about 50 per cent in a little over a month, and there are lots of studies on the market predicting a provide deficit for lithium again in 2026.

Sure, yes, perhaps it’s all simply coincidence. But typically talking, elephants don’t dance with out mud, and there’s a storm kicking up on the small finish of the ASX. Dollar Bill has seen this film and heard this tune earlier than, and he’s already snagged a front-row seat. The Dollar is no prophet, however relaxation assured — proper now the monocle is getting a proper correct polish.

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