FY25 recession risk is rising in Australia. See why select small caps with strong growth drivers and modest valuations offer income and capital growth potential.
~ 1 min. read
By: Datt Capital
July 18 2024: Based on the current trajectory of slowing quarterly growth, there is a real possibility that Australia may experience a recession in financial year 2025, according to Emanuel Datt, chief investment officer of Datt Capital.
“The household savings rate – a good barometer of the true state of the economy – is at lows not seen since March 2008, even though the current conditions are very different to what they were at that time and during the GFC,” Datt said.
“Also, present conditions are not conducive to interest rate adjustments which means the RBA is likely to hold rates steady in the short term and cuts may not be on the agenda,” Datt says.
While net migration is at all-time highs, and potentially holding up the Australian economy, investors need to know that traditional safe-haven investments are unlikely to provide the same level of certainty they have in the past.
“In these kinds of environments, investors need to look outside of the large cap universe and focus on stronger smaller companies with good growth potential and idiosyncratic drivers of returns. Small caps also currently have modest valuations which makes them doubly attractive,” Datt says.
Large cap shares are set to have a flatter return profile over the next 12 months but may provide investors with a reasonable income return profile. At a sector level, Datt Capital expects technology, financial services and niche commodities to be the outliers over the next 12 months. Real estate, infrastructure and bulk commodities are expected to struggle.
“Our focus is on strategically valuable, scarce assets with global appeal with multiple avenues of value realisation,” Datt says.
Founded in 2016, Datt Capital is a Melbourne-based Australian focused Long-only Fund Manager. Datt Capital is focused on generating alpha by structuring its portfolio in a unique and uncorrelated manner, across asset classes. Its investments consist primarily of listed equity, debt and derivatives solely in Australian markets.
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Datt Capital Pty Ltd
ABN 37 124 330 865
AFSL 542100
390 St Kilda Rd, Melbourne VIC 3004
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Datt Capital Pty Ltd
ABN 37 124 330 865
AFSL 542100
390 St Kilda Rd, Melbourne VIC 3004
© COPYRIGHT 2026. ALL RIGHTS RESERVED.
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