The small end of the Australian share market is making a strong recovery today. Investors were scared that President Donald Trump’s tariffs would start a full-blown trade war.
It would appeare it would go that way when China said it would start imposing tariffs on American products like wine and fruit.
Small caps are generally a lot more volatile compared to large caps. Last week small caps declined by more, today small caps are rocketing upwards. For example:
Afterpay Touch Group Ltd (ASX: APT) is up by 1.5%.
Zenitas Healthcare Limited (ASX: ZNT) has grown by 2.57%.
Catapult Group International Ltd (ASX: CAT) is up by 2.12%.
Paragon Care Ltd (ASX: PGC) has risen by 1.44%.
Small cap investment managers are also making a good recovery today. WAM Microcap Limited (ASX: WMI) is up by 4.21%, NAOS Absolute Opportunities Co Ltd (ASX: NAC) is up by 0.5% and Clime Capital Limited (ASX: CAM) is up by 1.16%.
Investors who are able to withstand the extra volatility in small caps could be well rewarded as they’re likely to deliver the best growth on the ASX. After all, it’s much easier for a company to grow its profit from $10 million to $20 million compared to a company needing to grow profit from $1 billion to $2 billion.
There could be more volatility ahead as the US raises interest rates over the next couple of years. Plus, President Donald Trump seems to be determined to make his presidency as interesting as possible. Russia, North Korea, China and the US’ allies are all experiencing things they never have before from the world’s leading nation.
If you’re still at the life stage where you’re a buyer of shares, you want there to be volatility so you can pick up shares at a good price.
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Motley Fool contributor Tristan Harrison owns shares of WAM MICRO FPO and Zenitas Healthcare Ltd. The Motley Fool Australia owns shares of and has recommended Catapult Group International Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Paragon Care Limited and Zenitas Healthcare Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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