Executive Summary
January delivered a bifurcated market: record highs in parts of the US and positive momentum in Europe, while pockets of Asia remained flat. Beneath the surface, however, bond-market volatility has been building and we’re seeing a clear rotation into hard assets and defensive exposures. This short, pragmatic update from InvestorPulse outlines what we saw in the month, why it matters for ASX small-cap investors and practical implications for portfolios heading into 2026.
Key Highlights
- Offshore equities (notably the US) reached fresh highs in January, supporting risk appetite.
- Bond market volatility increased, signalling rising interest-rate and inflation uncertainty.
- Strong observable retail demand for physical precious metals — queues at bullion dealers are lengthening.
- Themes gaining momentum: gold, silver, diversified base metals, critical materials and defensive bonds.
Market Analysis
Global markets exhibited a dual personality: headline strength in equities but underlying stress in fixed income. Rising yields and price action in international bond markets suggest investors are re-pricing rate expectations and inflation risk. That re-pricing is driving a rotation out of rate-sensitive assets and into hard assets that historically perform well under inflationary pressure or currency uncertainty.
Demand signals are tangible — physical gold and silver purchases have picked up noticeably. Simultaneously, critical materials and diversified base metals are attracting renewed interest given their role in transition technologies and supply constraints. For ASX small caps, this environment favours well-capitalised resource explorers and producers with clear value drivers and tight cost control.
Investment Thesis
- Increase selective exposure to hard assets: Target quality gold and silver developers/producers with strong balance sheets and clear production or near-term catalysts.
- Prioritise critical-materials and base-metals juniors that have demonstrable jurisdictional advantages or binding offtake interest.
- Maintain defensive ballast: chunky bonds or cash-equivalents remain important to manage volatility spikes and protect capital.
- Be disciplined on valuation and execution: market rotation can be swift — focus on companies with proven management, de-risked projects and clear funding pathways.
Conclusion
January’s market action is a useful reminder that headline equity strength can mask underlying risk. For ASX small-cap investors, this paints a pragmatic opportunity: favour resource and critical-material exposures with robust fundamentals while maintaining defensive liquidity. Questions or stock ideas? InvestorPulse welcomes enquiries — send them through and we’ll include them in the next monthly pulse.