Speculation continues…

Since the beginning of this indomitable bull market run one of the quiet leaders has been small-cap stocks. Typically small-caps are at the forefront in the beginning stages of a bull market, however this class continues to surge. Small-caps also carry a much higher degree of risk, hence much greater potential returns. Let’s look at chart of the Russell 2000 chart. At the market depths in March 2009 the Russell traded below 350 before bottoming out. Since then this bellwether small-cap index has returned an astounding 142%.

Even the most speculative equities that trade on the bulletin board continue to see inflows of significant capital despite having the highest degrees of risk. So what does all this mean? Some market historians believe that too much speculation in the marketplace is a tell tale sign of equities overheating. From my perspective, no matter what the metrics or statistics are, prudent risk management is essential in any market and never invest with money you can’t afford to lose.

All the best.