The ASX Small Ordinaries Index fell 30 per cent from the beginning of 2022 and didn’t start to find its feet again until eight months ago, recovering a modest 17 per cent since then and still trading below pre-COVID highs. Had it not been for a handful of outperforming resource-related components, the already shabby-looking index would have been much worse.

The performance is all the more profound when measured against the much-used ASX-200 market indicator, which has risen 76 per cent since the COVID lows and 6 per cent since the start of 2022.

Part of the reason behind the big disparity between the two indexes can be put down to the steep rise in global inflation since the end of the global coronavirus pandemic, which forced investors to switch tack from high-growth companies with no dividends into high-yielding blue chips and bank deposits – leaving the smaller end largely starved of investors.

Additionally, the phenomenal growth in the use of Exchange Traded Funds (ETFs) – vehicles aligned with index performance – by financial advisors keen to reduce risk exposure for clients and possibly their own risk of running foul of authorities through negligent advice, has literally sucked the life out of small stocks.

However, it is only now that investors, who are typically forward-looking, have started to spot the hint of an interest rate drop on the horizon and are beginning to pick through the ashes looking for the next run in growth stocks.

Who knows whether their timing is right or not? After all, a drop in the inflation rate is still proving frustratingly slow, an American election is just months away and geopolitical risk is showing no interest in subsiding.

But, to coin a much-used idiom, these are all known knowns and the risks are therefore almost certainly already priced into the market.

One thing is for sure, though, well managed companies in a growth sector will always shine through, eventually. As investors slowly return to the growth sector looking for a return, a strong set of financial year numbers and millions of dollars in fresh equity are likely to have Raiz on a few ASX watchlists.

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