What’s so important about mid July?

Commentary: Why we think the bull market will be back after mid July. What is the Big Beautiful Bill and why do we care?

Another prediction that the bull market for small cap stocks might be about to come back?

Yes.

Here is another one from us, including why we think mid July onwards will be a sustained, positive period of time for small stocks in general.

...keeping in mind that over the last three years we have incorrectly called the bull market return approximately ~2.5 times.

(one time was relatively non-committal so we aren’t fully counting it)

There was a nice little 6 to 8 week bull run in small stocks last year, during October to November 2024.

Then it abruptly fizzled out in December.

(we do count that one as a failed prediction)

At the time we used an analogy comparing the recovery of the small end of the market to the recovery from a searing hangover.

(or a broken collarbone for those of us old enough not to binge drink anymore but silly enough to still be playing play team sports on Sundays)

The point is that the small cap market's recovery will likely be similar to recovering from a hangover or sporting injury.

Initially it's slow moving, painful, seemingly never ever ending.

But with time passing, confidence grows, you get longer and stronger periods of strength and recovery.

Until it finally gets back to normal.

(and the risky behaviours commence again?)

Whether self-inflicted (hangover) or accidental (injury), humans need time to slowly recover and build back confidence in increasing waves before getting back to normal function.

Small cap market sentiment is basically the collective emotions and mental state of hundreds of thousands of humans participating in the market.

So it's no surprise to see its recovery mimicking how humans individually recover

The main point being made was the sustained “risk-on” behaviour would not suddenly come back instantly.

There would be intermittent bursts of activity and pockets of positive sentiment.

So what's so special about “mid July” that makes us think the small end of the market (where we Invest) will have a run?

It’s been around 3 years since the “music stopped” on the 2020-2022 run.

Here are the events that we are observing or waiting for that (in our opinion) in the coming weeks could create a sustained, positive environment for small stocks on the ASX:

1. There is recent interest in some areas of the small end of the market - we have observed some smaller precious metals and defence metals stocks delivering strong runs over the last 2 months - a good start for overall sentiment with the market seeing a few winners again.

2. June tax loss selling finishes July 1st - tax loss selling pressure comes off small cap stocks, traditionally July is a positive month in the small end of the market.

3. Australia rate cut decision on July 8th - a rate cut puts more discretionary money into peoples pockets, and low rate environments are generally better for risk-on investing sentiment.

(Source - AFR)

4. US rate cuts coming? Trump is making a lot of noise about wanting to see US rate cuts - and big ones, even going to the length of threatening to fire US Fed chairman Jerome Powell if he doesn't deliver deep cuts ASAP.

(Source - Reuters)

5. Multiple global trade deals to be announced by July 9th? - In April Trump announced bigger than expected tariffs on every country, and then gave them 90 days to cut a new trade deal. In about two weeks it will be the end of the “you have 90 days to do a new trade deal” tariff freeze, so we expect a few re-cut trade deals to be announced - the market likes global trade certainty.

(Source - Bloomberg)

6. US president Trump’s “One Big Beautiful Bill” voted in by July 4th? This is Trump's major bill that will lock in new budgets and laws to enact his vision for the USA.

(Source - US Associated Press)

These are the factors that we think could contribute to a positive run in small stocks after mid July (the “due dates” all occur in the first two weeks of July).

For our Portfolio strategy, we are particularly interested in Trump's “Big Beautiful Bill“ to get voted in by the 4th July.

Over the last 12 months we have weighted our Portfolio to ASX listed stocks with USA based projects, specifically in:

• Ship building supply chains (AL3),
• Critical defence metals (RML, SS1),
• Uranium (GUE, GTR),
• And precious metals (JBY, SS1, HAR).

The Big Beautiful Bill is 1,000+ page document, so initially we asked AI to assist us find where it refers to the particular themes we are invested in:

• Shipbuilding Supply Chains: Invests $29 billion to strengthen US shipbuilding supply chains, funding advanced manufacturing, unmanned vessels, and expanded dry-dock infrastructure to enhance naval production efficiency.
• Defense Spending: Increases spending with $23 billion for munitions (up from $21 billion), $500 million for critical munitions production, $2 billion for drones and AI, and $25 billion for Trump’s Golden Dome missile defense program, enhancing advanced defense capabilities.
• Critical Defense Metals: Includes provisions aimed at bolstering the U.S. critical minerals sector. Notably, the bill allocates $2.5 billion for a national critical minerals stockpile and $500 million for a Department of Defense loan program to support domestic mining projects
• Uranium and Nuclear Energy: Bolsters domestic uranium enrichment and nuclear energy supply chains by supporting critical mineral initiatives, complementing efforts like Orano’s Tennessee facility to reduce reliance on Russia and Kazakhstan for nuclear fuel, though direct uranium funding is not specified.

(Source: read the full Big Beautiful Bill here)

Extra spending and encouraging legislation in areas we are Invested in - sounds good to us.

Here are our Investments that may benefit if the Big Beautiful Bill is voted into law in the coming weeks:

AML3D (ASX:AL3) - 3D printing metals parts for shipbuilding supply chains - Ohio, USA

Our Investment AL3 looks like it might be a winner from the shipbuilding spend proposed in the Big Beautiful Bill.

AL3 supplies metal 3D printing systems to speed up shipbuilding supply chains...

(3D printing is also known as additive manufacturing)

AL3 already sells to the US Navy supply chain and has opened a US technology centre & manufacturing hub set up in Ohio, USA.

Here is what we found in the Big Beautiful Bill (we manually looked through the document the old fashioned way this time):

(Source: Big Beautiful Bill page 110)

(Source: Big Beautiful Bill page 134)

AL3’s share price has started a little move over the last week or so:

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

For our AL3 Investment thesis (including risks) read our AL3 Investment Memo.

Resolution Minerals (ASX:RML) - Gold, silver, antimony and tungsten in Idaho, USA.

The Bill also increases defence spending and onshoring of critical defence metals supply chains.

Our latest Investment RML is acquiring an antimony, gold, silver and tungsten project in Idaho, USA.

Antimony and tungsten are both critical defence metals.

The project has drill ready targets, historical antimony and tungsten production and successful gold exploration - gold hits from surface that were never assayed for antimony...

RML’s project is directly next door to the biggest antimony project in the USA: $2BN Perpetua Resources.

For our RML Investment thesis (including risks) read our RML Investment Memo.

Sun Silver (ASX:SS1) - Silver and antimony in Nevada, USA

SS1 has a 480 million ounces of silver equivalent JORC resource in Nevada, USA - which the company thinks could have antimony running through it.

Antimony is a critical defence metal, USA has no domestic supply, the antimony price is up 300% over the last 6 months and ASX stocks with US based antimony projects have been delivering price runs on volume.

SS1’s 480 million ounce silver equivalent JORC resource is from ~200 historical drill holes that were only tested for gold and silver, so when new drill holes were tested for and returned antimony grades, the company started looking at historical holes for antimony too.

For our SS1 Investment thesis (including risks) read our SS1 Investment Memo.

Global Uranium and Enrichment (ASX:GUE), Uranium and uranium enrichment - Wyoming, USA

The Big Beautiful Bill bolsters domestic uranium enrichment and nuclear energy supply chains by supporting critical mineral initiatives,

GUE owns 50% of the Pine Ridge Uranium Project in Wyoming, USA - an In-Situ Recovery (ISR) uranium project which has an initial exploration target of 24.4 to 51.3 million pounds.

It also owns the Tallahassee Project in Colorado, USA with a mineral resource estimate of ~52.2 million pounds of uranium.

GUE’s strategy is to build a high grade uranium portfolio, targeting a potential 100Mlbs of total resources.

We also like that GUE owns 21.9% of a “world leading” uranium enrichment technology.

Now, GUE has just announced a transformational transaction that is going to help it dramatically scale up its ‘pounds in the ground’ uranium resources.

(uranium enrichment has been in the news a lot in the last few weeks...)

Read our latest GUE update here(including risks)

GTi Energy (ASX:GTR), Uranium - Wyoming, USA

GTR has a 8.57 million pound uranium resource in Wyoming USA, next door to GUE.

GTR is currently in a trading halt for a capital raise (we are putting some cash into the raise).

The Australian Financial Review spilled the beans on GTR’s new cornerstone investor on Thursday:

(Source)

We also participated in the last GTR capital raise back in September - here’s why (including Risks)

Pantera Lithium (ASX:PFE), Lithium - Arkansas, USA

PFE is exploring for lithium brines in the Smackover Formation in South West Arkansas, USA.

Their plan is to re-enter old oil wells and extract lithium rich brines.

PFE has some big name neighbors all with a similar plan...

And a couple of weeks ago energy super major Chevron moved in next door to PFE - (this isn't shown on the map above)

(Source)

A$400BN Chevron is the third supermajor to pick up ground in the region following in $120BN Equinor and $757BN Exxon Mobil.

Read our Update on Chevron moving next door to PFE here

So will the small cap market start a bull run from mid July?

We hope so.

That is our theory, but nobody can predict it accurately.

(as evidenced by our last 2.5 failed attempts to call it)

Will the stocks listed benefit from the Big Beautiful Bill?

We believe it looks good but the benefits could take a long time, or not at all, and even have unanticipated effects to our particular investments - we just don’t know - that’s why you need risk management.

But we are going to be closely following events over the next 3 weeks.

Have a great weekend,

Next Investors