In this episode of the SCT Podcast, we discuss the recent rally in small cap stocks, whether the moves will last, and if investors should move their investment focus from large cap to small cap stocks.
- Trade disputes between the USA and trading partners have increased volatility.
- Small cap stocks have been maintaining their strength despite pullbacks in the S&P 500 and DOW.
- Will the small cap rally last?
- Is the move in small caps the last push before a larger, more substantial market retracement?
Over the recent past, small cap indexes like the Russell 2000 (RUT) and S&P Small Cap 600 Index (SML) have been making new highs while the S&P 500 (SPX) and DOW (DJI) have seen pullbacks from highs and spent many weeks consolidating. At first glance, it would look like the small-caps are the place to be right now in the market as the indexes seemingly shrug off the recent trade news from the US government, but is it too good to be true? In this episode, we discuss whether it is a good idea to jump on board the small-cap trend and bail on the established stocks that we have typically traded, or stay the course looking for the small-cap bubble to burst.
We discuss the best ways to participate in the rally using options, and what you can do to help reduce the impact of the surprise announcements coming from the US government.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.