The Russell 2000, which tracks small caps, is leading the stock market higher. This index is up dramatically in 2013. The tracking ETF, the iShares Russell 2000 Index (IWM) is up 36% since last November. This leads all the indexes, including the NASDAQ, S&P 500 and Dow Jones Industrial Average.
So what does it mean? Ultimately, when a small cap index is leaving the charge higher, it means investors are chasing high risk equities. When investors are chasing high risk things, history has shown us that an overall top is close. Look at the technology bubble in 2000 or the real estate bubble in 2007. When average investors want in and are willing to take crazy risk, a collapse is not far behind.
This is something to keep in mind going forward as you invest. Be wary of a market that thinks nothing can hurt it because Ben Bernanke will always be there to support it. When the little investors are running into high risk assets, the top is near or at hand.
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Small Cap Index Leading Market: What Does It Mean?
Published 07/16/2013, 01:17 AM
Updated 07/09/2023, 06:31 AM
Small Cap Index Leading Market: What Does It Mean?
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