The big Aussie investor dilemma for 2026 | Bonds & Fixed Income

Goodness me.

Back on May 26, I wrote the next to my Small Cap Systems subscribers…

“If you’re looking to trade, our existing position in Electro Optic Systems (EOS) is looking ripe for further appreciation…

“EOS is a defence contractor that’s pivoting to specialise in the counter drone market.

“One of the biggest themes in the market right now is the global escalation in military spending and geopolitical tension.

“This suggests that EOS could enjoy double digit, compound growth in revenue over the next 5 years, at least.

“Two other shares in this space, Austal (ASB) and DroneShield (DRO) are up for the year too.

“EOS traded in a sideways range for the first three months of the year. It’s now broken out of it.”

EOS is now up 100% since that trade went out. Look on the chart…

And have a look at $DRO this yr (Small Cap Systems isn’t on this one)…

These are the strikes that deliver buyers, merchants and punters to the small cap sector.

It’s this type of price motion that would deliver a complete lot more. Fast money sells like nothing else.

Also think about this report from the Australian Financial Review at this time…

“Boutique manager Paragon has topped Morningstar’s list of Australia’s best stock-pickers for the 2024-2025 financial year, after its hedge fund achieved the rare feat of doubling investors’ money.”

That is an epic return. Well finished John.

Oddly enough, I used to be sitting throughout the desk from Paragon’s John Deniz the opposite week.

Little did I do know he was on his strategy to being the king stock picker for the yr.

How did he double his fund capital? Mining shares!

All of the above – (unprofitable) small caps like EOS and DRO, mining juniors – are for the high risk investor.

This just isn’t for Aunt Joan’s retirement fund, or your spare mortgage cost.

But the above examples do show what you possibly can obtain if you happen to’re ready to put some capital into larger risk alternatives.

One of these, for me, back in 2023, was bitcoin.

It was round A$35 thousand per BTC back then.

It’s getting mighty close to A$200,000 now. That’s turbocharged the returns of my SMSF in recent times.

The bitcoin bull run again seeds the concept there’s money to be made in financial markets. This ought to attract more money as people chase returns.

Quite a bit of people gripe that the Aussie market is up at highs regardless that earnings are flat and the world appears a bit of a canine’s breakfast at present.

But you need to dance when and the place it’s raining too.

That stated…

Right now, Aussie buyers – together with you, me and anybody else – face the identical drawback.

The ASX/200 is up and about, however with out displaying a lot earnings growth for three years. The Chanticleer column calls it a “profit drought”.

Worse, 11 firms account for 50% of the index. If they’re not pumping, it’s arduous to see the index actually ripping.

That places the burden on buyers to return up with some different methods.

It may very well be something – American shares, gold, bitcoin, small caps, thematic ETFs – no matter fits your fashion.

But one factor just isn’t negotiable. You’ll need to be lively.

This is a soiled phrase to some. They wish to promote the road that passive investing is the holy grail of funds management.

And for some, it’s. But to not me, and, if you happen to’re studying this, most likely not for you both.

There are loads of investment methods that beat the ASX/200 return final yr. No doubt some will achieve this again this yr.

But what labored within the final 12 months most likely gained’t work the identical method, or to the identical extent, within the subsequent 12.

That’s why the financial markets are just like the health club. You have to show up daily, and do the whole lot you possibly can, with no finish in sight, ever.

Often, one thing you see or learn gained’t grow to be related for months, typically years.

If you’re going to be an lively investor, don’t neglect it’s a lifelong pursuit.

Arnold Schwarzenegger nonetheless goes to the health club at 77. He’s been understanding for over 60 years. Warren Buffett simply resigned as CEO of Berkshire Hathaway at 94.

The query you need to know from the get go: do you adore it that a lot to try this?

Best needs,

Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator

With Japanese approaching higher home elections on 20 July, bond market merchants are promoting first and asking questions later.

The Japanese 30-year bond yield jumped 43bps (practically half a %) in simply the final two weeks to three.18%.

You can see within the chart above that 30-year bonds had a yield of 0% in 2016 which is totally bonkers.

In the final couple of years the Bank of Japan has stepped back from their control of the yield on long bonds however have saved rates of interest extremely low, stoking inflation.

We are seeing a steepening of the yield curve worldwide as buyers demand larger returns to tackle the risk of holding bonds for a few years.

When rates of interest have been close to zero, yield chasing buyers piled into long-term bonds. Yield curves grew to become very flat which meant buyers have been receiving ridiculously low yields for taking up the risk of inflation in future many years (30-year yields at 0% for instance).

That distortion in markets is now reversing and it seems Japanese bonds are but to search out the suitable stage.

How high will charges go and at what level will stock markets take fright?

Big spending governments are on discover that they’ll’t proceed to borrow and spend with none penalties. Perhaps we’re nonetheless within the early phases of the Japanese bond market sell-off and the subsequent stage includes a crash..

Regards,

Murray Dawes,
Editor, Retirement Trader