Derek Pain: The little'uns lead the way to market revival

No Pain, No Gain

Well, have shares recovered from the worst excesses of the bear market – or is recent strength just another dead cat bounce?

There are indications suggesting that the worst of the slump is over. Conversely, it could be unwise to ignore the multitude of cautionary signals still urging investors to tread with extreme care.

It is the conundrum that has often confronted those whose wellbeing depends on the stock market. Others, who merely dabble in shares, are, of course, keen to know the answer.

At this stage in the game, it is impossible to produce a definite response. I have said that shares should stage something of a comeback this year although my hunch was that most of the action would occur in the second six months of 2009.

But, perhaps, it has already started. Despite some negative days, shares, blue chips to small caps, have made considerable progress, admittedly from a very low base. There will be good and bad days – indeed good and bad weeks – but I get the distinct impression that the stock market could be over the worst and possibly edging into better times. It is, however, unclear whether such activity heralds a full-blown revival.

Although a myriad of established indicators offer little comfort to the optimists, some do provide just a hint that happier days are nearer than many think.

It is away from all the statistical mumbo jumbo that, perhaps, the real clues are to be found. And the stock market, which often anticipates the direction of the economy, is offering a plethora of bullish signs.

The leading execution-only stockbroker TD Waterhouse reported a dramatic trading upsurge last week and it is rumoured that stockjobber Winterfood Securities was inundated with trades on one day recently. Other straws in the wind include the launch of a small-cap fund, record trading on Plus, still regarded as a small-cap market, and increasing confidence among experienced investors.

Bob Morton, a serial investor with a string of small-cap involvements including Clarity Commerce Solutions, the latest addition to the no pain, no gain portfolio, is an ex-bear who is now feeling bullish. Richard Plackett, the manager of BlackRock's UK Special Situations Fund, is another one making confident noises and so is the stockbroker Daniel Stewart.

All are small company specialists. Very often little'uns lead any revival. They probably will next time. After all, they led the retreat as many investors switched into blue chips in the vain hope that their investments would enjoy more protection. Plackett says shares are the "cheapest they have ever been" and points to investors focussing on recovery plays. The bear market is "effectively over", he declares. Daniel Stewart talks of business confidence on AIM, the junior market, being buoyant and suggests corporate activity is on the horizon.

Six months ago, a number of investment stars, such as veterans Warren Buffett and Anthony Bolton, forecast the slump was over. They got their timing wrong. But as I have often said, it is virtually impossible to call the turn of the stock market. Buffett and Bolton are probably now more geared to the top end of the trade. Perhaps small-cap players, such as Morton and Plackett, are nearer the real coalface. Certainly small-caps have performed quite well in recent times. And there is undoubtedly a refreshing air of (near) confidence swirling around the stock market undercard. Minor players are well placed to lead any revival as recovery tends to feed through to their bottom lines more quickly.

The recession has been brutal to small-caps. Indeed the very survival of AIM, created for smaller companies, has been questioned as constituents departed, many delisting or going bust.

I go along with the feeling that the worst of the slump is over although I am not convinced that a strong recovery is already under way. But the signs are more encouraging. And real progress could be near.

BlackRock has produced some interesting sums, underlining the attraction of small-caps. It says that £100 invested at the end of 1955, when the small-cap index first appeared, was worth an impressive £184,000 at the end of March. And that, don't forget, embraces the horrendous crash that has occurred since the summer of 2007. A general stock market investment of £100 over the same period is valued at £33,000.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

    Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

    £50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

    Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

    £13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

    Ashdown Group: Training Programme Manager - City, London

    £40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

    Day In a Page

    NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

    Who's monitoring the outsourced NHS services?

    A report finds that private firms are not being properly assessed for their quality of care
    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
    How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

    How do Greeks feel about Syriza?

    Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
    From Iraq to Libya and Syria: The wars that come back to haunt us

    The wars that come back to haunt us

    David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
    Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

    Too busy to surf? Head to The Pool

    A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
    Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

    UK's Major Tum to blast off on a spice odyssey

    Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
    John Harrison's 'longitude' clock sets new record - 300 years on

    ‘Longitude’ clock sets new record - 300 years on

    Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
    Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

    Let the propaganda wars begin - again

    'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
    Why Japan's incredible long-distance runners will never win the London Marathon

    Japan's incredible long-distance runners

    Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
    Why does Tom Drury remain the greatest writer you've never heard of?

    Tom Drury: The quiet American

    His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
    You should judge a person by how they peel a potato

    You should judge a person by how they peel a potato

    Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
    Beige is back: The drab car colours of the 1970s are proving popular again

    Beige to the future

    Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
    Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

    Bill Granger cooks with fresh cheeses

    More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
    Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

    Shay Given: 'This FA Cup run has been wonderful'

    The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
    Timeless drama of Championship race in league of its own - Michael Calvin

    Michael Calvin's Last Word

    Timeless drama of Championship race in league of its own